CTS(CTS) - 2025 Q1 - Quarterly Results

First Quarter 2025 Financial Highlights 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] - The SyQwest acquisition contributed $3 million in revenue during the first quarter[7] - 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] 2025 Full-Year Guidance 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] - 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] Financial Statements (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 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 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 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 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] Adjusted Gross Margin 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 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 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 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 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 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 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 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% |