CTS (CTS) investor relations material

Market performance and business mix

• Transportation market share declined from 70% to 44% of revenue, stabilizing with new products and cost-reduced versions launching later this year.

• Diversified businesses (medical, aerospace, defense, industrial) now comprise 56% of revenue, growing at double-digit rates and delivering higher quality earnings.

• Electrification growth has slowed but remains a long-term focus, with investments in current sensing and by-wire technologies.

• Industrial, medical, and defense markets are prioritized for organic and acquisition-driven growth, targeting 5% each.

• Recent acquisition of SyQwest expanded defense offerings, with seasonality expected in defense revenue.

Strategic initiatives and operational focus

• Evolution 2030 initiative launched, prioritizing accelerated growth both organically and through acquisitions.

• Operational excellence and maintaining a collaborative, results-driven culture are key priorities.

• Internal leadership and training programs are emphasized for talent development.

• Focused R&D investments and disciplined capital allocation, with CapEx at 4% and R&D at 4%-6% of revenue.

• SAP system rollout nearly complete, expected to drive efficiency.

M&A strategy and financial discipline

• M&A is the primary capital deployment focus, especially in industrial, medical, aerospace, and defense; transportation is considered selectively.

• Preference for high-quality assets with strong gross margins; not interested in fixer-uppers.

• Comfortable with acquisition multiples of 12%-13%, avoiding overvalued deals above 16%-17%.

• Open to carve-outs if transition risks are managed; private company integrations have been successful.

• Willing to lever up to 3x for the right acquisition, but prefers 2%-2.5% leverage for flexibility.