CTS (CTS) 27th Annual Needham Growth Conference summary

Strategic focus and diversification

• Emphasizes a strategy centered on products that sense, connect, and move, with a major push to diversify into medical, aerospace, defense, and industrial markets, aiming for these to outpace transportation growth.

• Diversified businesses now represent 52% of revenue, up from 35% a few years ago, with a target to reach 60% and beyond.

• Recent acquisitions, such as SyQwest, have expanded capabilities in defense and moved the company up the value chain.

• Focus on both organic (5%) and acquisition-driven (5%) growth, with disciplined capital allocation and a strong balance sheet to support larger deals.

• Ongoing optimization of global footprint and operational efficiency, including regional setups and internal programs like Focus 2025.

Market performance and trends

• Medical and aerospace/defense markets are strong, with medical supported by blue-chip customers and innovation in minimally invasive and diagnostic technologies.

• Aerospace and defense grew 25% year-over-year, aided by acquisitions and a robust backlog, with ambitions to cap exposure for balanced risk.

• Industrial markets faced headwinds due to inventory overhang, but a 2% sequential revenue increase in Q3 2024 signals early recovery.

• Transportation remains challenging, especially in China due to local OEM competition and second-source pressures, but new products like eBrake and DrivePad target future growth.

• Electrification and sustainability are key themes, with products supporting emission reduction and energy efficiency across sectors.

Technology, R&D, and competitive landscape

• Core competencies include advanced ceramics and magnetics, with unique foundry capabilities in North America and Europe.

• R&D spend is disciplined, typically ranging from high 4% to 7% of revenue, with a focus on projects aligned with strategic goals and cross-market efficiencies.

• Main competitors include Forvia (automotive), Morgan Ceramics, TRS Technologies, and CeramTec.

• Product innovation includes new technologies for medical imaging, drug delivery, and by-wire vehicle systems.

• Customer engagement is close, with engineering support often resident at customer sites to drive tailored solutions.