CTS(US:CTS)2024-05-01 19:49Financial Data and Key Metrics Changes - Sales for Q1 2024 were $126 million, a decline of 14% from Q1 2023, with non-transportation sales down 17% and transportation sales down 10% year-over-year [8][30] - Adjusted gross margin was 36.2%, up 86 basis points from Q1 2023, driven by operational improvements and a shift towards non-transportation sales [9][50] - Adjusted diluted earnings per share were $0.47, down from $0.61 in the same period last year [22][32] Business Line Data and Key Metrics Changes - Non-transportation sales decreased 17% year-over-year but increased 7% sequentially, indicating early signs of recovery in the industrial market [10][17] - Transportation sales were $66.5 million in Q1 2024, down 10% from the same period last year and down 4% sequentially [45] - Medical market sales were stable, with bookings up sequentially and from the same period last year [10][50] Market Data and Key Metrics Changes - The North American light vehicle market is expected to be in the range of 15.5 million to 16 million units, with European production forecasted at 17 million units and China volumes at 28 million units [27] - Electric vehicle penetration rates have softened in most regions, while hybrid adoption has improved [15] Company Strategy and Development Direction - The company aims to expand its customer base and range of applications in industrial, medical, and defense end markets as part of its diversification strategy [47] - The transition of production from the Juarez facility to the Matamoros site in Mexico is expected to be completed in Q2 2024 [31] Management's Comments on Operating Environment and Future Outlook - Management expects a soft first half of 2024 with continued challenges in transportation sales, while non-transportation sales are anticipated to strengthen [16][60] - The company remains confident in its ability to drive efficiencies in its supply chain and manufacturing sites to improve operational performance and profitability [9][92] Other Important Information - The book-to-bill ratio was 1.07 in Q1 2024, indicating positive order trends across several product lines [21] - The company generated $18 million in operating cash flow in Q1 2024, compared to $11 million in Q1 2023, with a cash balance of $162 million as of March 31, 2024 [52] Q&A Session Summary Question: What is driving the positive book-to-bill for the non-transport side of the business? - The improvement is largely driven by industrial, with solid performance in medical and defense markets as well [34] Question: How is the inventory burn down progressing? - Inventory levels are improving, with a small increase in bookings and sales, indicating a positive trend [55] Question: What is the outlook for the second half of the year? - The second half is expected to show improvement, particularly in industrial markets, while transportation remains challenging [60][62] Question: How is the company addressing competition from second sources? - The company is focused on innovation, quality, and on-time delivery to regain market share lost to competitors [76][86]