CTS Corp. Q1 FY2025 earnings call

• Diversification strategy is key, with diversified end market revenue up 14%. - Medical end market saw 13% sales growth, strong book-to-bill ratio of 1.3, wins in medical ultrasound and therapeutics. - Aerospace and defense sales up 39% (8% organic), bookings up 32%, moving towards sensors and subsystems. - Industrial market showing gradual recovery with 3% sequential and 4% year-over-year sales growth. - Transportation sales down 12% due to China and commercial vehicle factors, but added a new product line win. - SyQwest acquisition added $3 million in revenue, with seasonality expected, and integration progressing. - Monitoring tariff and geopolitical uncertainties, focusing on agility and cost adjustments.

First quarter sales were $126 million. Diversified end market sales (including medical, aerospace and defense, industrial) were up 14% year-over-year, accounting for 53% of overall revenue. Medical end market sales were up 13% with a book-to-bill ratio of 1.3. Aerospace and defense sales were up 39% year-over-year (8% organic growth excluding SyQwest acquisition). Industrial market sales were up 3% sequentially and 4% year-over-year. Transportation sales were $58 million, down 12% year-over-year due to China market dynamics and commercial vehicle product softness.

• Maintaining sales guidance of $520 million to $550 million. - Adjusted diluted EPS guidance range of $2.20 to $2.35, assuming current market conditions. - SyQwest acquisition revenue expected to strengthen in the next quarter and second half of 2025.

• Tariffs and geopolitical environment creating uncertainty in demand. - China market dynamics impacting transportation revenue. - Seasonality in SyQwest acquisition revenue influenced by U.S. government funding approval. - Potential demand softening in industrial market due to tariff uncertainty.

Q: How is the booking profile in non-transportation side and any prebuy due to tariffs?

A: Booking improvement in diversified markets in Q1, medical was strongest, no broad-based prebuy seen.

Q: Change in transportation market assumptions?

A: Monitoring prebuy, but guidance assumes current conditions, new product line in vehicle footwell added.

Q: Profit profile cadence for balance of year?

A: Revenue increasing throughout year, helped by SyQwest seasonality and mix change.

Q: Manufacturing footprint and tariffs?

A: Regional footprint includes Asia, Europe, North America (Mexico), USMCA exemption helps, working on pricing and logistics with customers.

Q: SG&A increase in March quarter?

A: Driven by SyQwest acquisition, including amortization of intangibles and reset incentive plans.

Q: Margin improvement drivers?

A: Diversification ratio growth, operational efficiency, currency impact, growth in diversified markets faster than transportation.