CTS(CTS) - 2025 Q2 - Quarterly Results

Press Release & Executive Summary Second Quarter 2025 Highlights CTS Corporation reported strong second-quarter 2025 results, including a 4% year-over-year sales increase, with diversified end markets growing by 13%, alongside significant improvements in net income, diluted EPS, adjusted diluted EPS, adjusted EBITDA margin, and robust operating cash flow Second Quarter 2025 Key Financial Highlights (YoY Change) | Metric | Q2 2025 | Q2 2024 | Change | % Change | | :------------------------ | :------ | :------ | :----- | :------- | | Sales (in millions of USD) | $135M | $130M | +$5M | +4% | | Sales (Diversified End Markets) | N/A | N/A | N/A | +13% | | Sales (Transportation End Market) | N/A | N/A | N/A | -6% | | Net Income (in millions of USD) | $19M | $15M | +$4M | +26.7% | | Net Income (% of Sales) | 14% | 11% | +3% | N/A | | Diluted EPS (in USD) | $0.62 | $0.48 | +$0.14 | +29.2% | | Adjusted Diluted EPS (in USD) | $0.57 | $0.54 | +$0.03 | +5.6% | | Adjusted EBITDA Margin | 23.0% | 21.7% | +1.3% | N/A | | Operating Cash Flow (in millions of USD) | $28M | $20M | +$8M | +40% | 2025 Guidance CTS Corporation is maintaining its full-year 2025 financial guidance, assuming current market conditions persist 2025 Full-Year Guidance | Metric | Range | | :----------------- | :---------------- | | Sales (in millions of USD) | $520 - $550 million | | Adjusted Diluted EPS (in USD) | $2.20 - $2.35 | CEO Commentary Kieran O'Sullivan, CEO, highlighted double-digit sales growth in diversified end markets, solid profitability with expanding adjusted EBITDA margin, and strong operating cash flow, reaffirming the strategic priority of diversification through organic growth and acquisitions - Achieved double-digit sales growth in diversified end markets[3] - Adjusted EBITDA margin expanded by 130 basis points[3] - Generated strong operating cash flow in the quarter[3] - Strategic priority remains diversification through organic growth and acquisitions[3] Company Information About CTS Corporation CTS Corporation is a global designer and manufacturer of custom engineered solutions that 'Sense, Connect and Move,' providing sensors, actuators, and electronic components to aerospace & defense, industrial, medical, and transportation markets - CTS Corporation (NYSE: CTS) is a leading global designer and manufacturer of custom engineered solutions that "Sense, Connect and Move"[2][9] - Manufactures sensors, actuators, and electronic components across North America, Europe, and Asia[9] - Serves aerospace & defense, industrial, medical, and transportation markets[9] - Diversified end markets include industrial, aerospace & defense, and medical sectors[10] Conference Call and Supplemental Materials CTS hosted a conference call on July 24, 2025, at 10:00 a.m. ET, providing dial-in details and access to a supplemental slide presentation and live audio webcast via its investor relations website - Conference call held on July 24, 2025, at 10:00 a.m. (ET)[7] - Dial-in numbers provided for U.S. and international access, with passcode 932754[7] - Supplemental slide presentation and live audio webcast available on CTS's investor relations website[7] Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Statements of Earnings For the second quarter of 2025, CTS reported increased net sales, gross margin, operating earnings, and net earnings compared to the prior year, reflecting improved profitability, with diluted EPS also seeing a significant rise Condensed Consolidated Statements of Earnings (Unaudited) - Key Metrics (in millions of USD, except EPS) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $135.3M | $130.2M | $261.1M | $255.9M | | Cost of goods sold | $82.9M | $83.8M | $162.1M | $164.5M | | Gross margin | $52.4M | $46.4M | $99.0M | $91.5M | | Selling, general and administrative expenses | $23.1M | $21.3M | $46.7M | $43.6M | | Research and development expenses | $6.3M | $6.1M | $12.5M | $12.7M | | Restructuring charges | $0.3M | $1.2M | $0.7M | $2.9M | | Operating earnings | $22.7M | $17.8M | $39.0M | $32.3M | | Net earnings | $18.5M | $14.7M | $31.9M | $25.8M | | Diluted EPS (in USD) | $0.62 | $0.48 | $1.06 | $0.84 | | Cash dividends declared per share (in USD) | $0.04 | $0.04 | $0.08 | $0.08 | Condensed Consolidated Balance Sheets As of June 30, 2025, CTS reported an increase in total assets, driven by higher current assets, while total liabilities slightly decreased, and shareholders' equity also saw a healthy increase Condensed Consolidated Balance Sheets (Unaudited) - Key Metrics (in millions of USD) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | ASSETS | | | | Cash and cash equivalents | $99.4M | $94.3M | | Accounts receivable, net | $85.6M | $77.6M | | Inventories, net | $57.1M | $52.3M | | Total current assets | $261.8M | $242.2M | | Goodwill | $207.5M | $201.3M | | Total Assets | $784.7M | $765.4M | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Accounts payable | $47.3M | $42.6M | | Total current liabilities | $100.5M | $98.5M | | Long-term debt | $88.0M | $92.3M | | Total Liabilities | $234.6M | $237.2M | | Total shareholders' equity | $550.2M | $528.2M | Non-GAAP Financial Measures Explanation of Non-GAAP Measures CTS uses non-GAAP financial measures to supplement GAAP results, offering useful insights into core financial performance by excluding non-recurring or non-operating items, facilitating comparisons across periods and with industry peers - Non-GAAP measures supplement GAAP results, providing useful information to investors and analysts[18][19][29] - Adjustments include restructuring charges, environmental charges, acquisition-related adjustments, inventory fair value step-up costs, foreign exchange (gains) losses, non-cash pension expenses (income), and certain discrete tax items[19][20] - These adjustments are considered not normal, recurring cash operating expenses necessary to operate the business[19] Adjusted Gross Margin CTS's adjusted gross margin for Q2 2025 improved to 38.7% of net sales, up from 35.8% in Q2 2024, reflecting enhanced profitability after accounting for specific adjustments Adjusted Gross Margin (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross margin (in millions of USD) | $52.4M | $46.4M | $99.0M | $91.5M | | Net sales (in millions of USD) | $135.3M | $130.2M | $261.1M | $255.9M | | Gross margin as a % of net sales | 38.7% | 35.6% | 37.9% | 35.7% | | Adjustments to reported gross margin (in millions of USD) | — | $0.2M | — | $0.7M | | Adjusted gross margin (in millions of USD) | $52.4M | $46.6M | $99.0M | $92.2M | | Adjusted gross margin as a % of net sales | 38.7% | 35.8% | 37.9% | 36.0% | Adjusted Operating Earnings Adjusted operating earnings for Q2 2025 increased to $21.9 million, representing 16.2% of net sales, compared to $19.4 million (14.9% of net sales) in Q2 2024, indicating improved operational efficiency Adjusted Operating Earnings (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating earnings (in millions of USD) | $22.7M | $17.8M | $39.0M | $32.3M | | Operating earnings as a % of net sales | 16.8% | 13.6% | 14.9% | 12.6% | | Total adjustments to reported operating earnings (in millions of USD) | $(0.8)M | $1.6M | $(0.4)M | $3.8M | | Adjusted operating earnings (in millions of USD) | $21.9M | $19.4M | $38.6M | $36.1M | | Adjusted operating earnings as a % of net sales | 16.2% | 14.9% | 14.8% | 14.1% | Adjusted EBITDA Margin CTS achieved an adjusted EBITDA margin of 23.0% in Q2 2025, an increase from 21.7% in Q2 2024, demonstrating enhanced core profitability Adjusted EBITDA Margin (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net earnings (in millions of USD) | $18.5M | $14.7M | $31.9M | $25.8M | | EBITDA (in millions of USD) | $32.7M | $25.9M | $58.4M | $47.7M | | EBITDA Margin | 24.2% | 19.9% | 22.4% | 18.6% | | Total adjustments to EBITDA (in millions of USD) | $(1.6)M | $2.3M | $(1.6)M | $6.0M | | Adjusted EBITDA (in millions of USD) | $31.1M | $28.2M | $56.8M | $53.7M | | Adjusted EBITDA Margin | 23.0% | 21.7% | 21.8% | 21.0% | Adjusted Net Earnings and Adjusted Diluted EPS Adjusted net earnings for Q2 2025 were $17.3 million, resulting in an adjusted diluted EPS of $0.57, up from $16.5 million and $0.54, respectively, in Q2 2024, reflecting improved earnings per share on an adjusted basis Adjusted Net Earnings and Adjusted Diluted EPS (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net earnings (A) (in millions of USD) | $18.5M | $14.7M | $31.9M | $25.8M | | Diluted EPS (in USD) | $0.62 | $0.48 | $1.06 | $0.84 | | Total adjustments, tax affected (B) (in millions of USD) | $(1.3)M | $1.8M | $(1.5)M | $5.0M | | Total tax adjustments (C) (in millions of USD) | $0.1M | — | $0.1M | $0.3M | | Adjusted net earnings (A+B+C) (in millions of USD) | $17.3M | $16.5M | $30.5M | $31.1M | | Adjusted net earnings per share (in USD) | $0.57 | $0.54 | $1.01 | $1.01 | | Adjusted net earnings as a % of net sales | 12.8% | 12.7% | 11.7% | 12.1% | Other Supplemental Financial Information Controllable Working Capital Controllable working capital for Q2 2025 was $95.4 million, representing 17.6% of annualized sales, indicating efficient management of short-term capital needs Controllable Working Capital (Unaudited) | Metric | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :------------------------------------------ | :------------ | :------------ | :---------------- | | Net accounts receivable (in millions of USD) | $85.6M | $85.4M | $77.6M | | Net inventory (in millions of USD) | $57.1M | $51.7M | $52.3M | | Accounts payable (in millions of USD) | $(47.3)M | $(40.9)M | $(42.6)M | | Controllable working capital (in millions of USD) | $95.4M | $96.2M | $87.3M | | Quarter sales (in millions of USD) | $135.3M | $130.2M | $126.4M | | Annualized sales (in millions of USD) | $541.2M | $520.6M | $505.6M | | Controllable working capital as a % of annualized sales | 17.6% | 18.5% | 17.3% | - Controllable working capital ratio is a useful measure of efficiency in managing short-term capital needs[32] Free Cash Flow CTS generated $25.1 million in free cash flow during Q2 2025, a significant increase from $15.0 million in Q2 2024, demonstrating strong cash generation capabilities Free Cash Flow (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities (in millions of USD) | $28.4M | $19.6M | $43.9M | $37.9M | | Capital expenditures (in millions of USD) | $(3.3)M | $(4.6)M | $(7.7)M | $(8.7)M | | Free cash flow (in millions of USD) | $25.1M | $15.0M | $36.2M | $29.3M | | Operating cash flow as a percentage of net earnings | 153% | 133% | 138% | 147% | | Free cash flow as a percentage of adjusted net earnings | 145% | 91% | 119% | 94% | - Free cash flow is a useful measure demonstrating the company's ability to generate cash[33] Capital Expenditures Capital expenditures for Q2 2025 were $3.3 million, representing 2.4% of net sales, a decrease from $4.6 million (3.6% of net sales) in Q2 2024 Capital Expenditures (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Capital expenditures (in millions of USD) | $3.3M | $4.6M | $7.7M | $8.7M | | Net sales (in millions of USD) | $135.3M | $130.2M | $261.1M | $255.9M | | Capex as % of net sales | 2.4% | 3.6% | 2.9% | 3.4% | Additional Financial Information The company reported depreciation and amortization expense of $8.6 million and stock-based compensation expense of $0.6 million for Q2 2025, with certain previously furnished 2024 amounts updated due to immaterial errors Additional Financial Information (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Depreciation and amortization expense (in millions of USD) | $8.6M | $7.3M | $17.0M | $14.7M | | Stock-based compensation expense (in millions of USD) | $0.6M | $1.3M | $2.3M | $2.5M | - Certain previously furnished 2024 amounts were updated due to immaterial errors, as detailed in the Quarterly Report on Form 10-Q[36] Legal & Contact Information Cautionary Statement Regarding Forward-Looking Statements This section serves as a cautionary statement, advising readers that the document contains forward-looking statements subject to various risks and uncertainties, which could cause actual results to differ materially from expectations, highlighting factors such as supply chain disruptions, economic changes, acquisition integration issues, and geopolitical risks - Statements regarding future performance are considered "forward-looking statements" under the Private Securities Litigation Reform Act of 1995[12] - Forward-looking statements are not guarantees of future performance and are based on management's expectations and assumptions, subject to uncertainties[12] - Risks include supply chain disruptions, economic changes (inflation/recession), acquisition integration issues, funding of US Government contracts, technological change, market conditions, reliance on key customers, public health crises, environmental expenses, intellectual property protection, pricing pressures, and international operation risks (trade barriers, exchange rates, geopolitical risks)[12] - CTS undertakes no obligation to publicly update forward-looking statements[12] Contact Information Contact details for investor inquiries are provided, directing them to Ashish Agrawal, Vice President and Chief Financial Officer of CTS Corporation - Contact: Ashish Agrawal, Vice President and Chief Financial Officer, CTS Corporation[13] - Address: 4925 Indiana Avenue, Lisle, IL 60532 USA[13] - Phone: +1 (630) 577-8800, Email: ashish.agrawal@ctscorp.com[13]