Company Overview and Strategy - CTS aims to be a leading provider of sensing and motion devices and connectivity components [6] - The company targets end markets growing at a mid-single-digit rate [42] - CTS's strategy involves enhancing sales and product management for organic growth [48] - A balanced capital deployment approach is used, focusing on growth investments, acquisitions, and returning capital to shareholders [61] Financial Performance and Guidance - 2020 net sales were $424 million [7, 78] - The company anticipates sales between $470 million and $490 million in 2021 [63] - Adjusted earnings per share for 2020 were $1.12, with an expected range of $1.20 to $1.60 for 2021 [65, 78] - The company targets 10% annual growth through organic and inorganic strategies [71] Market Segmentation - Transportation accounts for 57% of sales [7] - Industrial represents 22% of sales [7] - Aero & Defense and Medical each contribute 9% to sales [7] - Telecom & IT makes up 3% of sales [7]

Financial Performance - Net sales for Q1 2025 were $125,769, essentially flat compared to Q1 2024, with a 13.6% increase in diversified end markets and a 12.1% decrease in transportation markets [105]. - Gross margin increased to $46,549 in Q1 2025, up 3.2% from Q1 2024, with gross margin percentage rising from 35.9% to 37.0% [106]. - SG&A expenses were $23,623, representing 18.8% of net sales in Q1 2025, compared to 17.7% in Q1 2024, primarily due to higher depreciation and amortization expenses [107]. - R&D expenses were $6,190, or 4.9% of net sales in Q1 2025, down from $6,601 or 5.2% in Q1 2024, reflecting continued investment in product development [108]. - Restructuring charges decreased significantly to $451, or 0.4% of net sales in Q1 2025, from $1,693 or 1.3% in Q1 2024, due to headcount reductions in response to softening demand [109]. - Net cash provided by operating activities was $15,518 in Q1 2025, compared to $18,311 in Q1 2024, with net earnings contributing $13,367 [114][115]. - Cash and cash equivalents were $90,288 as of March 31, 2025, down from $94,334 at December 31, 2024, with total long-term debt at $86,700 [113]. - The effective income tax rate decreased to 17.1% in Q1 2025 from 18.6% in Q1 2024, attributed to a change in the mix of earnings taxed at lower rates [111]. Market Impact - The SyQwest acquisition contributed an additional $2,987 in net sales, while foreign exchange rate changes negatively impacted net sales by $835 year-over-year [105]. - Significant customers included Toyota Motor Corporation at 11.9% and Cummins Inc. at 10.3% of total net sales in Q1 2025 [125]. Risks and Uncertainties - The company emphasizes that forward-looking statements regarding performance and financial condition are subject to risks and uncertainties, which may cause actual results to differ materially from expectations [126]. - There have been no material changes in the company's exposure to market risk during the three months ended March 31, 2025 [127].

Financial Data and Key Metrics Changes - Company reported first quarter sales of $126 million, essentially flat compared to the first quarter of 2024 [5][20] - Adjusted diluted earnings were $0.44 per share, down from $0.47 per share in the same period last year [22][23] - Adjusted gross margin was 37%, up 77 basis points year-over-year [21] Business Line Data and Key Metrics Changes - Diversified end market sales increased by 14% year-over-year, accounting for 53% of overall revenue [5][6] - Medical end market sales rose by 13% compared to the same period in 2024, with a book to bill ratio of 1.3 [6][8] - Aerospace and Defense sales surged by 39% year-over-year, with bookings up 32% [9][10] - Industrial market sales increased by 4% year-over-year, with bookings up 19% [11][12] - Transportation sales decreased by 12% due to market dynamics in China [13][20] Market Data and Key Metrics Changes - Current bookings for the second quarter indicate an improving trend, but there is caution regarding second half demand due to tariffs and geopolitical uncertainty [4][19] - North American light vehicle market is expected to be in the 15 million to 16 million unit range, with potential impacts from tariffs [16][17] Company Strategy and Development Direction - Company is focused on diversification across medical, industrial, aerospace, and defense markets, while progressing in electrification and transportation [3][15] - The strategy includes moving from a component supplier to a supplier of sensors, transducers, and subsystems [10] - Company aims to expand its customer base and range of applications in diversified end markets [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term prospects despite near-term tariffs and economic pressures [19][69] - Demand in the medical end market is expected to remain solid, driven by ultrasound and therapeutic volume growth [15] - Aerospace and Defense revenue is anticipated to remain strong due to a healthy backlog and the SideQuest acquisition [15][18] Other Important Information - The company generated $16 million in operating cash flow for the first quarter, with a cash balance of $90 million [23][24] - Long-term debt balance was $87 million, providing good liquidity for strategic acquisitions [24] Q&A Session Summary Question: Booking profile strength in non-transportation business - Management noted strong bookings in diversified markets, particularly in medical therapeutics, but did not observe broad-based pre-buying [29][32] Question: Changes in transportation market assumptions - Management continues to monitor the transportation market but has not factored in any demand drop in guidance [33] Question: Guidance on profit profile for the year - Management indicated an increasing revenue profile throughout the year, supported by SideQuest seasonality and a mix change in diversified markets [34][35] Question: Manufacturing footprint and tariffs - Company has a regional manufacturing footprint with minimal imports from Asia, and is actively discussing pricing strategies with customers [39][41] Question: Margin improvement drivers - Expected margin enhancement is driven by growth in diversified markets, operational efficiency improvements, and currency impacts [64]

Financial Data and Key Metrics Changes - The company reported first quarter sales of $126 million, essentially flat compared to the first quarter of 2024 [4] - Adjusted diluted earnings were $0.44 per share, down from $0.47 per share in the same period last year [21] - The adjusted gross margin was 37%, up 77 basis points year-over-year [20] Business Line Data and Key Metrics Changes - Diversified end market sales increased by 14% year-over-year, accounting for 53% of overall company revenue [4][5] - Medical end market sales rose by 13% compared to the same period in 2024, with a book to bill ratio of 1.3 [5][6] - Aerospace and Defense sales surged by 39% year-over-year, with bookings up 32% [8][9] - Industrial market sales increased by 4% year-over-year, with bookings up 19% [10][11] - Transportation sales decreased by approximately 12% due to market dynamics in China [12] Market Data and Key Metrics Changes - Current bookings for the second quarter indicate an improving trend, although there is caution regarding second half demand due to tariffs and geopolitical uncertainty [3][18] - North American light vehicle market is expected to be in the 15 million to 16 million unit range, with potential impacts from tariffs [15][16] - European production is forecasted at 16 million units, showing some softness due to overcapacity from Chinese OEMs [16] Company Strategy and Development Direction - The company continues to execute on its diversification strategy across medical, industrial, aerospace, and defense markets [2] - There is a focus on moving from a component supplier to a supplier of sensors, transducers, and subsystems [9] - The company aims to expand its customer base and range of applications in diversified end markets [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term prospects for the medical end market, driven by ultrasound and therapeutic volume growth [14] - The company is closely monitoring the impact of tariffs and geopolitical factors on demand [18] - There is an expectation of gradual recovery in the industrial market, although potential demand softening is being watched [11] Other Important Information - The company generated $16 million in operating cash flow for the first quarter, with a cash balance of $90 million at the end of the quarter [22][23] - The long-term debt balance was $87 million, providing good liquidity for strategic acquisitions [23] Q&A Session Summary Question: Booking profile strength in non-transportation business - Management noted strong bookings in diversified markets, particularly in medical therapeutics, but did not observe broad-based pre-buying [28][31] Question: Changes in transportation market assumptions - Management continues to monitor the transportation market but has not factored in any demand drop in their guidance [32] Question: Guidance on profit profile for the year - Management indicated that revenue is expected to increase throughout the year, aided by SideQuest seasonality and a favorable mix change [33][34] Question: Manufacturing footprint and tariffs - The company has a regional manufacturing footprint that mitigates tariff impacts, with a focus on adapting costs and pricing in collaboration with customers [38][40] Question: Margin improvement drivers - Expected drivers of margin improvement include growth in diversified markets and operational efficiency [64]

Q1 2025 Financial Performance - Revenue remained flat at $126 million compared to Q1 2024[8, 36] - Adjusted gross margin increased by 77 bps to 37%[8, 36] - Adjusted diluted EPS decreased by 7% to $044[8, 36] End Market Analysis - Diversified end markets revenue increased by 14% year-over-year and accounted for 53% of total revenue[11, 39] - Aerospace & Defense sales increased by 13% year-over-year[14] - Medical sales increased significantly by 39% year-over-year[19] - Transportation end market revenue decreased by 12% year-over-year due to lower commercial vehicle sales and China softness[11, 39] Book-to-Bill Ratio and Booked Business - The company's overall book-to-bill ratio was 117[11] - Transportation end market has $1 billion in total booked business at the end of Q1 2025[26] - Medical's book-to-bill ratio was 15 with bookings up 32% year-over-year[19] FY 2025 Guidance - Revenue is projected to be between $520 million and $550 million[28] - Adjusted diluted EPS is expected to be between $220 and $235[30]

[First Quarter 2025 Financial Highlights](index=1&type=section&id=First%20Quarter%202025%20Financial%20Highlights) CTS Corporation reported flat sales of $126 million for Q1 2025, with diversified end-markets growing 14% offset by a 12% decrease in transportation Q1 2025 Key Financial Metrics (YoY) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Sales | $126 million | $126 million | Flat | | Net Income | $13 million | $11 million | +18.2% | | Diluted EPS (GAAP) | $0.44 | $0.36 | +22.2% | | Adjusted Diluted EPS | $0.44 | $0.47 | -6.4% | | Adjusted EBITDA Margin | 20.5% | 20.3% | +0.2 p.p. | | Operating Cash Flow | $16 million | $18 million | -11.1% | - Sales performance was mixed across end-markets: sales to diversified markets (industrial, aerospace & defense, medical) grew **14% YoY**, while sales to the transportation market decreased **12% YoY**[7](index=7&type=chunk) - The SyQwest acquisition contributed **$3 million in revenue** during the first quarter[7](index=7&type=chunk) - CEO Kieran O'Sullivan highlighted strong bookings in the medical, aerospace and defense, and industrial markets, emphasizing diversification as a strategic priority amidst tariff uncertainties[3](index=3&type=chunk) [2025 Full-Year Guidance](index=1&type=section&id=2025%20Guidance) CTS Corporation is maintaining its full-year 2025 guidance despite near-term tariff uncertainties and economic pressures Full-Year 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Sales | $520 - $550 million | | Adjusted Diluted EPS | $2.20 - $2.35 | - Management is actively monitoring the economic impact of tariffs and the geopolitical environment, focusing on agility in adapting to cost and price adjustments[5](index=5&type=chunk) - The company does not provide forward-looking reconciliations of non-GAAP measures like adjusted diluted EPS to GAAP measures, citing the difficulty in forecasting items such as restructuring and acquisition costs[6](index=6&type=chunk) [Financial Statements (Unaudited)](index=4&type=section&id=Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated statements of earnings and balance sheets for the period ending March 31, 2025, forming the basis for financial analysis [Condensed Consolidated Statements of Earnings](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20EARNINGS%20-%20UNAUDITED) For Q1 2025, net sales were $125.8 million, flat compared to Q1 2024, with net earnings increasing to $13.4 million or $0.44 per diluted share Q1 2025 Statement of Earnings Highlights (in thousands) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $125,769 | $125,750 | | Gross margin | $46,549 | $45,090 | | Operating earnings | $16,285 | $14,536 | | Net earnings | $13,367 | $11,119 | | Diluted EPS | $0.44 | $0.36 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of March 31, 2025, total assets were $765.5 million, total liabilities decreased to $227.3 million, and total shareholders' equity increased to $538.2 million Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $90,288 | $94,334 | | Total Assets | $765,528 | $765,427 | | Long-term debt | $86,700 | $92,300 | | Total Liabilities | $227,290 | $237,219 | | Total Shareholders' Equity | $538,238 | $528,208 | [Non-GAAP Financial Measures and Reconciliations](index=6&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section reconciles GAAP to non-GAAP financial measures, providing a clearer view of core operational performance by excluding specific non-recurring items [Explanation of Non-GAAP Measures](index=6&type=section&id=Explanation%20of%20Non-GAAP%20Measures) CTS uses non-GAAP measures to supplement GAAP results, aiding in period-over-period and peer comparisons by excluding non-normal, non-recurring cash operating expenses - Key items excluded from GAAP measures include: - Restructuring charges and related costs - Environmental charges for non-operating facilities - Acquisition-related costs - Inventory fair value step-up from acquisitions - Foreign exchange gains/losses - Non-cash pension expenses - Certain discrete tax items[21](index=21&type=chunk) [Adjusted Gross Margin](index=7&type=section&id=Adjusted%20Gross%20Margin) In Q1 2025, both GAAP and adjusted gross margin were 37.0%, an improvement from Q1 2024's adjusted gross margin of 36.2% Adjusted Gross Margin Reconciliation (YoY) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Gross margin % (GAAP) | 37.0% | 35.9% | | Adjusted gross margin % | 37.0% | 36.2% | [Adjusted Operating Earnings](index=8&type=section&id=Adjusted%20Operating%20Earnings) Adjusted operating earnings for Q1 2025 were $16.8 million (13.4% of sales), slightly up from $16.7 million (13.3% of sales) in Q1 2024 Adjusted Operating Earnings Reconciliation (YoY, in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating earnings (GAAP) | $16.3 | $14.5 | | Total adjustments | $0.5 | $2.2 | | Adjusted operating earnings | $16.8 | $16.7 | | Adjusted operating margin | 13.4% | 13.3% | [Adjusted EBITDA Margin](index=9&type=section&id=Adjusted%20EBITDA%20Margin) The adjusted EBITDA margin for Q1 2025 was 20.5%, a slight increase from 20.3% in Q1 2024, with adjusted EBITDA at $25.8 million Adjusted EBITDA Reconciliation (YoY, in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net earnings (GAAP) | $13.4 | $11.1 | | EBITDA | $25.8 | $21.8 | | Total adjustments to EBITDA | $0.0 | $3.7 | | Adjusted EBITDA | $25.8 | $25.5 | | Adjusted EBITDA Margin | 20.5% | 20.3% | [Adjusted Net Earnings and Adjusted Diluted EPS](index=10&type=section&id=Adjusted%20Net%20Earnings%20and%20Adjusted%20Diluted%20Earnings%20Per%20Share) Adjusted net earnings for Q1 2025 were $13.2 million, decreasing from $14.6 million in Q1 2024, resulting in adjusted diluted EPS of $0.44 Adjusted Diluted EPS Reconciliation (YoY) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $0.44 | $0.36 | | Total adjustments per share | $0.00 | $0.11 | | Adjusted Diluted EPS | $0.44 | $0.47 | [Other Supplemental Information](index=12&type=section&id=Other%20Supplemental%20Information) This section provides additional financial metrics like controllable working capital, free cash flow, and capital expenditures for deeper insight into operational efficiency [Controllable Working Capital](index=12&type=section&id=Controllable%20Working%20Capital) Controllable working capital as a percentage of annualized sales was 18.3% at the end of Q1 2025, a slight improvement from 18.5% in Q1 2024 Controllable Working Capital (YoY) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Controllable working capital | $92.1M | $92.8M | | As a % of annualized sales | 18.3% | 18.5% | [Free Cash Flow](index=13&type=section&id=Free%20Cash%20Flow) Free cash flow for Q1 2025 was $11.0 million, down from $14.3 million in Q1 2024, primarily due to lower net cash from operating activities Free Cash Flow (YoY, in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $15.5 | $18.3 | | Capital expenditures | ($4.5) | ($4.0) | | Free cash flow | $11.0 | $14.3 | [Capital Expenditures](index=13&type=section&id=Capital%20Expenditures) Capital expenditures in Q1 2025 were $4.5 million, or 3.6% of net sales, an increase from $4.0 million or 3.2% in the prior year Capital Expenditures (YoY) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Capital expenditures | $4.5M | $4.0M | | Capex as % of net sales | 3.6% | 3.2% |

Core Insights - CTS Corporation reported strong first quarter 2025 results with double-digit sales growth in diversified markets despite a challenging operating environment [2][10] - The company maintains its sales guidance for 2025 in the range of $520-$550 million and adjusted diluted EPS between $2.20-$2.35 [4] Financial Performance - First quarter 2025 net sales were $126 million, flat year-over-year, with a 14% increase in sales to diversified end markets and a 12% decrease in transportation end market sales [10] - Net income for the quarter was $13 million, representing 11% of sales, compared to $11 million or 9% of sales in Q1 2024 [10] - Earnings per diluted share increased to $0.44 from $0.36 in the same quarter last year, while adjusted earnings per diluted share decreased to $0.44 from $0.47 [10] - Adjusted EBITDA margin improved to 20.5% from 20.3% year-over-year [10] Market Strategy - The company emphasized diversification as a strategic priority, focusing on growth in revenues and quality of earnings through organic growth and strategic acquisitions [2] - Strong bookings were noted in medical, aerospace and defense, and industrial markets during the quarter [2] Guidance and Economic Outlook - Management is closely monitoring the economic impact of tariffs and geopolitical conditions, emphasizing agility in adapting to cost and price adjustments [4] - The company expects to maintain its current market conditions for the remainder of the year [4] Operational Metrics - Operating cash flow for Q1 2025 was $16 million, down from $18 million in Q1 2024 [10] - The company reported a gross margin of $46.5 million for the quarter, compared to $45.1 million in Q1 2024 [13]

Core Viewpoint - CTS Corporation is set to release its earnings for the first quarter of 2025 on April 30, 2025, at 8:00 a.m. (ET) [1] Earnings Release Details - The conference call to discuss the first quarter 2025 results is scheduled for April 30, 2025, at 10:00 a.m. (ET) [2] - Dial-in numbers for the conference call include +1-833-470-1428 (Toll-Free) and +1-404-975-4839 (Local) for U.S. callers, with additional global dial-in numbers available for international participants [2] Webcast Information - A live audio webcast of the conference call will be accessible from the Investors section of CTS Corporation's website and will be archived for one year [3] Company Overview - CTS Corporation is a leading designer and manufacturer of products that Sense, Connect, and Move, producing sensors, actuators, and electronic components across North America, Europe, and Asia [4] - The company serves various markets, including aerospace/defense, industrial, medical, and transportation [4]

Core Viewpoint - CTS Corporation is set to release its earnings for the first quarter of 2025 on April 30, 2025, at 8:00 a.m. (ET) [1] Earnings Release Details - The conference call to discuss the first quarter 2025 results is scheduled for April 30, 2025, at 10:00 a.m. (ET) [2] - Dial-in numbers for the conference call include +1-833-470-1428 (Toll-Free) and +1-404-975-4839 (Local) for U.S. callers, with additional global dial-in numbers available for international participants [2] Webcast Information - A live audio webcast of the conference call will be accessible from the Investors section of CTS Corporation's website and will be archived for one year [3] Company Overview - CTS Corporation is a leading designer and manufacturer of products that Sense, Connect, and Move, producing sensors, actuators, and electronic components across North America, Europe, and Asia [4] - The company serves various markets, including aerospace/defense, industrial, medical, and transportation [4]

Sales and Market Performance - In 2024, net sales from non-U.S. operations accounted for 42.0% of total net sales, down from 45.0% in 2023 and 44.4% in 2022[39]. - The breakdown of net sales by end market in 2024 shows Transportation at 49%, Industrial at 23%, Medical at 14%, and Aerospace and Defense at 14%[21]. - Major customers include Toyota Motor Corporation at 12.2% and Cummins, Inc. at 11.7% of total net sales in 2024[33]. - Approximately 90% of 2024 net sales were attributable to sales engineers, with independent distributors accounting for about 6%[25]. - The SyQwest acquisition contributed $14,448 in net sales for 2024, enhancing the company's position in the defense market[169]. - Net sales for the year ended December 31, 2024, were $515,771, a decrease of $34,651 or 6.3% from 2023, primarily due to a 16.9% decline in transportation products[169]. Financial Performance - Gross margin for 2024 was $189,150, a decrease of $1,709 or 0.9% from 2023, influenced by lower sales volumes and partially offset by operational improvements[170]. - Selling, general and administrative expenses increased to $88,285, or 17.1% of sales in 2024, compared to $83,816, or 15.2% in 2023, driven by higher incentive compensation and the SyQwest acquisition[171]. - Cash and cash equivalents decreased to $94,334 at December 31, 2024, from $163,876 at December 31, 2023, with total debt rising to $91,253 from $67,500[177]. - Net cash provided by operating activities was $99,289 for 2024, compared to $88,811 in 2023, with net earnings of $58,114 contributing significantly[178]. - Net cash used in investing activities for 2024 was $140,556, primarily due to $121,912 for the SyQwest acquisition[182]. - The effective income tax rate decreased to 18.4% in 2024 from 19.5% in 2023, attributed to a change in the mix of earnings taxed at lower rates[175]. - Restructuring charges were $4,697 in 2024, down 33.6% from $7,074 in 2023, related to plant closure and consolidation activities[172]. Operational Risks and Challenges - In 2024, the company faced competitive risks typical in its end markets, including technical obsolescence and customer demands for lower costs and higher quality[37]. - Supply chain constraints, particularly shortages of semiconductor chips and resin, have impacted the company's ability to make scheduled shipments, potentially leading to revenue shortfalls[76]. - The ongoing Russia-Ukraine conflict has adversely affected the global economy and may continue to impact the company's operations and financial results[75]. - Inflationary pressures and increased costs of raw materials could negatively affect the company's gross margin and overall profitability[79]. - The company operates in cyclical industries, which may experience downturns that could materially affect its financial condition and operating results[80]. - A portion of the company's revenue is derived from defense-related products, which are subject to contract cancellations and delays, impacting revenue stability[81]. - The company faces risks from geopolitical tensions that could disrupt operations and supply chains, affecting financial performance[75]. - Fluctuations in operating results are common, influenced by demand changes, manufacturing efficiency, and component availability[83]. - The company may experience increased borrowing costs and limited access to capital markets due to economic downturns, impacting growth strategies[74]. - The company must navigate various risks, including labor disruptions and regulatory changes, that could adversely affect its business operations[82]. Strategic Initiatives and Acquisitions - The company has pursued acquisitions to complement its business, including TEWA, Meggitt, Maglab, and SyQwest, but may face challenges in completing these transactions and integrating new operations[84]. - Future acquisitions may lead to increased expenses and working capital requirements, potentially reducing return on invested capital and profitability[86]. - The company may consider divesting certain operations, which could involve risks such as management distraction and loss of customer relationships[87]. - Restructuring plans and capital projects have been initiated to improve cost structure and operational efficiency, but failure to execute these plans may lead to disruptions and higher costs[88]. Competitive Environment and Technology - The company operates in a highly competitive environment, facing risks of price erosion and technological change, which could adversely affect market share and profit margins[89]. - Rapid technological changes may render existing products obsolete, impacting the company's ability to recover research and development costs[90]. - Difficulties in developing and marketing new products could adversely affect the company's financial condition and operating results[91]. Regulatory and Compliance Issues - The company is subject to environmental regulations and potential liabilities, including a demand for reimbursement of $9.955 million related to environmental contamination[95]. - Changes in tax laws could materially affect the company's effective tax rate and future tax liabilities, impacting financial performance[97]. - The company is subject to the ongoing internal control provisions of the Sarbanes-Oxley Act, and any material weaknesses in internal control could affect financial reporting[132]. - The company may face adverse effects on its business and financial condition due to increasing scrutiny related to environmental, social, and governance (ESG) issues[133]. Cybersecurity and Technology Risks - Cybersecurity threats pose risks to the company's operations, potentially leading to financial losses and operational disruptions[103]. - The company has a multi-layered cybersecurity risk management strategy to mitigate threats and incidents[139]. - The company has experienced past cybersecurity incidents that have not materially impacted its business, but it anticipates facing additional threats in the future[143]. - Third-party cybersecurity incidents could harm the company's reputation and financial performance, as reliance on external service providers increases vulnerability[107]. - The integration of artificial intelligence technologies presents new risks, including regulatory scrutiny and potential reputational damage due to inaccuracies in AI outputs[108]. - The company faces risks related to maintaining and upgrading technology, which may require significant investment and could disrupt operations if not managed effectively[106]. Shareholder and Financial Management - The company has approved a share repurchase program authorizing the repurchase of up to $100 million of its common stock[136]. - Future dividends on the company's common stock may be restricted or eliminated based on earnings and cash flow[135]. - The company has a total credit facility availability of $400,000, with a balance outstanding of $91,253 as of December 31, 2024[186]. - The company was in compliance with all debt covenants as of December 31, 2024[188]. - The company will monitor future results for goodwill impairment and perform tests if indicators trigger a review[199]. Workforce and Employee Relations - The workforce consists of 3,549 employees, with 57% female and 43% male representation[43]. - The company faces challenges in attracting and retaining key personnel due to a competitive labor market, which may increase operating expenses and negatively impact growth[131]. International Operations and Risks - The company operates manufacturing facilities in North America, Asia, and Europe, with significant sales offices in multiple countries[18]. - The company faces risks associated with international operations, including political instability and currency fluctuations, which could adversely affect financial results[120]. - The company has $92,944 in foreign cash balances, with potential restrictions on timely and tax-efficient repatriation[189]. Inventory and Warranty Management - Over the last three years, product warranty reserves have ranged from 0.3% to 0.4% of net sales, indicating a stable reserve level[209]. - The company’s reserves for excess and obsolete inventories have ranged from 14.8% to 20.7% of gross inventory over the last three years[211]. Debt and Financial Obligations - The company uses interest rate swaps to convert a portion of its revolving credit facility's outstanding balance from a variable rate to a fixed rate, with contractual rates ranging from 1.49% to 2.49%[187]. - The commitment fee on the unused portion of the Revolving Credit Facility ranges from 0.175% to 0.25% based on the net leverage ratio[188]. - The company had minimum contractual future interest payments on hedged borrowings estimated to be $10,150 through maturity, with approximately $5,190 payable within 12 months[194]. - As of December 31, 2024, the outstanding principal on the Revolving Credit Facility was $91,253, with no amounts payable within 12 months[194].