CTS(US:CTS)2022-07-26 18:16Financial Data and Key Metrics Changes - Sales in Q2 2022 were $145 million, up approximately 12% compared to Q2 2021 [2][5] - Adjusted gross margin was 36.1%, down 70 basis points from 36.8% in the same period last year [3][36] - Adjusted EBITDA margin was 22.4%, up 90 basis points from 21.5% in Q2 2021 [3][8] - Adjusted earnings per diluted share were $0.62, up almost 20% from $0.52 in Q2 2021 [3][38] - Operating cash flow for Q2 2022 was $16.1 million [39] Business Line Data and Key Metrics Changes - Organic sales increased approximately 9% for the quarter [5] - Sales to non-transportation end markets increased 21.1% year-over-year, with double-digit growth in industrial and medical markets [35] - Sales to transportation customers increased 4.4% compared to Q2 2021, but decreased 5.6% sequentially due to supply constraints [35][36] Market Data and Key Metrics Changes - Demand was solid across medical and industrial markets, while defense was softer [6][29] - Transportation products were impacted by COVID-19 lockdowns in Asia and OEM production cuts [6] - The cumulative loss of vehicle builds due to COVID-19 and semiconductor shortages is expected to exceed 3 million units for the year [31] Company Strategy and Development Direction - The company finalized the acquisition of Ferroperm Piezoceramics, enhancing diversification strategy and expanding market opportunities [2][20] - Long-term strategic plan focuses on diversifying end market profile and expanding technologies, products, and geographic reach [21][22] - The goal is to have over 25% of light vehicle revenue coming from EV platforms by 2025 [25][26] Management's Comments on Operating Environment and Future Outlook - Management expects some softness in the second half of the year due to macroeconomic factors [46] - The company is adapting its cost structure quickly in response to market conditions, similar to actions taken during the COVID-19 pandemic [46] - Confidence remains in the long-term prospects of the business despite current challenges [32][34] Other Important Information - The company repurchased approximately $7.7 million of its stock during the quarter [40] - The updated guidance for full year 2022 sales is now in the range of $570 million to $600 million, with adjusted EPS expected between $2.40 to $2.55 [34] Q&A Session Summary Question: Impact of acquisition on updated guidance - The acquisition is expected to deliver in the low to mid $20 million range for the second half of the year [42] Question: Key drivers for EPS upside - Improved confidence in revenue expectations and efforts to offset cost pressures contributed to EPS upside [43] Question: Supply chain issues update - Supply chain issues have improved, particularly in non-transportation markets, but concerns remain regarding consumer demand due to inflation [49] Question: Details on Ferroperm acquisition - The technology is similar to existing products but allows for scaling with new products and customers, particularly in therapeutics and industrial applications [50][51] Question: Inventory levels and customer base - Inventory levels are returning to normal, and there are no significant issues flagged at this time [54] Question: EV revenue tracking and future expectations - Current EV wins are from legacy products, with expectations for growth in new products beyond 2025 [60][61]