CTS (CTS) Q2 2024 earnings summary

Executive summary

• Q2 2024 sales were $130M, down 10% year-over-year but up 4% sequentially, with net income rising to $14.7M and adjusted diluted EPS at $0.54.

• Non-transportation revenues grew 11% sequentially and 4% year-over-year, while transportation revenues declined 22% year-over-year due to market softness, especially in China.

• Net earnings increased 14% to $14.7M, with diluted EPS rising to $0.48 from $0.41 in Q2 2023.

• Completed acquisition of SyQwest, LLC for $125M, expanding defense and underwater acoustic capabilities and diversifying end markets.

• Focus remains on diversification, operational efficiency, and shareholder returns.

Financial highlights

• Q2 2024 sales were $130M, down 10% year-over-year, with adjusted diluted EPS at $0.54 and net income at $14.7M.

• Adjusted gross margin was 35.8%, up 80 bps year-over-year; adjusted EBITDA margin was 21.7%.

• Operating cash flow was $20M in Q2, with a cash balance of $161M and long-term debt of $65M as of June 30, 2024.

• $26M returned to shareholders year-to-date via share repurchases and dividends.

• Free cash flow for the first half of 2024 was $29M.

Outlook and guidance

• Full-year 2024 sales expected in the range of $525M–$550M; adjusted diluted EPS guidance is $2.05–$2.25, including SyQwest impact.

• Growth in the second half of 2024 expected to be more modest than previously communicated.

• SyQwest acquisition expected to be accretive in 2025, with a small unfavorable EPS impact ($0.04–$0.05) in 2024.

• Tax rate for Q2 was 17.6%; full-year expected range is 18%–21%.

• Management expects cash flows and available credit to be sufficient for operational and capital needs for at least the next twelve months.