Q4 2021 CTS Corp Earnings Call
Speaker 1: products, customers and geographic reach. We believe this enhances the value creation opportunity for our stakeholders as well as the quality of our airings.
Colors and geographic reach we believe this enhances the value creation opportunity for our stakeholders as well as the quality of our earnings.
We've made good progress on our diversification efforts, increasing non transportation sales to 45% of total 2021 sales compared to 35% of total sales in 2017.
Speaker 1: We've made good progress on our diversification efforts, increasing non-transportation sales to 45% of total 2021 sales, compared to 35% of total sales in 2017.
Full year 2021, non transportation related revenue increased 25% compared to 2020, while transportation related revenue increased 18%.
Speaker 1: Full year 2021 non-transportation related revenue increased 25% compared to 2020, while transportation related revenue increased 18%.
Speaker 1: Looking ahead, we continue to focus on further diversification by growing non-transportation revenues faster, while continuing to strategically grow our transportation business.
Looking ahead, we continue to focus on further diversification by growing non transportation revenues faster, while continuing to strategically grow our transportation business.
As such we are targeting an overall revenue growth rate of 10% with a goal of greater than 50% of total revenue from non transportation end markets.
Speaker 1: As such, we are targeting an overall revenue growth rate of 10%, with a goal of greater than 50% of total revenue from non-transportation and markets.
Speaker 1: With our broad exposure across the industrial markets, CTS is well positioned for growth, driven by the demand for increased automation, connectivity and energy efficiency.
With our broad exposure across the industrial markets Cts is well positioned for growth driven by the demand for increased automation connectivity and energy efficiency.
Speaker 1: We are making progress on transducer applications and flow measurement, an area with tremendous development potential. We are seeing a strong demand in inkjet printing for packaging and ceramic tile printing. In addition, we have advanced to the next step of qualification with an existing customer for a high temperature flow application and shipped samples to another European customer. Guitars continue to be popular leisure products and we continue to increase revenue with these customers.
We are making progress on transducer applications and flow flow measurement, an area with tremendous development potential we are seeing a strong demand in inkjet printing for packaging and ceramic tile printing.
In addition, we have advanced to the next step of qualification.
With an existing customer for a high temperature flow application and ship samples to another European customer.
Guitars continues to be popular leisure products and we continue to increase revenue with these customers.
Speaker 1: We also started shipments of a position sensor for an electric forklift application.
We also started shipments of our position sensor for an electric forklift applications.
At the same time, we continue to broaden our offering in medical for a traditional ultrasound technologies are driving substantial mid to long term growth. Additionally, expanding our temperature sensing offering in medical is a focus area for us and we recently obtained ISO 13, <unk> hundred 80 <unk>.
Speaker 1: At the same time, we continue to broaden our offering in medical for traditional ultrasound technologies are driving substantial mid to long term growth. Additionally, expanding our temperature sensing offering in medical is a focus area for us. And we recently attained ISO 13485 certification, enabling us to supply products across multiple medical applications.
Certification, enabling us to supply products across multiple medical applications are.
Speaker 1: Our sensors for sleep apnea equipment are in high demand, and we also recently advanced to second stage qualification for an assisted scalpel application.
Our sensors for sleep apnea equipment are in high demand and we also recently advanced a second stage qualification for an assisted scalpel application.
Speaker 1: In aerospace and defense, we are expanding our presence in undersea sonar applications and are developing samples with new European clients, for whom we are now quoting next-generation technologies and have begun low-volume shipments with one customer.
In aerospace and defense, we're expanding our presence in undersea sonar applications and are developing samples with new European clients for whom we are now quoting next generation technologies and have begun low volume shipments with one customer.
We are developing new material formulations based on textured, Zoe and single Crystal technologies.
Speaker 1: We are developing new material formulations based on textured piezo and single crystal technologies, which we anticipate will provide solid tailwinds for next generation solutions in new applications with larger solar rings and unmanned autonomous applications.
Which we anticipate will provide solid tailwind for next generation solutions, and new applications with larger solar rings and unmanned autonomous applications.
In transportation, the move towards electric and hybrid electric vehicles as well as increased sensor content with passive safety and future E brake applications present tremendous opportunities for us.
Speaker 1: In transportation, the move towards electric and hybrid electric vehicles, as well as increased sensor content with passive safety and future e-brake applications present tremendous opportunities for all.
Importantly, except for the smart actuator the rest of our portfolio is agnostic to the propulsion system, which allows us to be flexible to meet the needs of our customers.
Speaker 1: Importantly, except for the smart actuator, the rest of our portfolio is agnostic to the repulsion system, which allows us to be flexible to meet the needs of our customers.
In 2021, the global share of electric vehicles grew closer to 6% and we expect this to accelerate to 15% by 2025 and above 30% by the end of this decade with the Chinese market delivering the largest share gains the <unk>.
Speaker 1: In 2021, the global share of electric vehicles grew closer to 6% and we expect this to accelerate to 15% by 2025 and above 30% by the end of this decade with the Chinese market delivering the largest share gains.
Speaker 1: Demand for two real applications such as throttle sensing modules and throttle position sensors remain solid in the Asian market.
<unk> for <unk> applications, such as <unk> sensing modules and traveled position sensors remained solid in the Asian markets.
Overall across all end markets demand remains robust in particular in transportation, which we expect to continue given the low days on hand of vehicle inventories.
Speaker 1: Overall, across all end markets, the man remains robust in particular in transportation, which we expect to continue given the low days on hand of vehicle inventories.
As a result, we saw a 19% sequential improvement in transportation sales in the fourth quarter versus the third quarter.
Speaker 1: As a result, we saw a 19% sequential improvement in transportation sales in the fourth quarter versus the third quarter.
Although some of our automotive customers have confirmed demand through 2022, we continue to be concerned by supply challenges, primarily in semiconductor and resin along with labor challenges and further COVID-19 interruptions.
Speaker 1: Although some of our automotive customers have confirmed a demand through 2022, we continue to be concerned by supply challenges, primarily in semiconductor and resin, along with labor challenges and further COVID interruptions, all of which continue.
All of which continue to play the market.
Speaker 1: The expectation is for increased volume of 2022, and a larger increase in 2023, as the supply recovers and new emission standards for 2024 are adopted.
The expectation is for increased volume in 2022, and a larger increase in 2023 as the supply recovers and new emission standards for 2024 are adopted.
Speaker 1: While we anticipate demand for automotive products this year to remain robust, growth could range from the low single digits to mid-single digits and higher, depending on the impact of additional COVID interruptions and potential supply improvements. There is also a limited inventory of completed automobiles awaiting parts.
While we anticipate demand for automotive products. This year to remain robust growth could range from the low single digits to mid single digits in higher depending on the impact of additional COVID-19 interruptions and potential supply improvements. There is also a limited inventory of completed automobiles awaiting parts.
In the accelerator module product line, we had a large win with a north American OEM.
Speaker 1: In the Accelerator Module product line, we had a large win with an order of emergency.
Speaker 1: We also had wins with a Japanese OEM and were sourced by a North American OEM for European applications.
We also had wins with a Japanese OEM and were sourced by a north American OEM for a European application.
Speaker 1: For a path of safety sensors, we had a large win with a North American OEM for a safety application, for existing products, sorry, I'm for a chassis right height sensor.
For passive safety sensors, we had a large win with a north American OEM for a safety application for existing products, sorry, amphora chassis right height sensor.
On the Mega Sonics front, we were awarded extensions for existing products in production and for products in development.
Speaker 1: On the Megatonic Sprunk, we rewarded extensions for existing products in production and for products in development.
Speaker 1: Progress in securing electric vehicle wins continued as we added two new customers in Asia for chassis and brake sensing applications.
Dress and securing electric vehicle wins continued as we added two new customers in Asia for chassis and break sensing applications.
Speaker 1: In total for the full year, we were awarded 21 platforms of various sizes for electric vehicle applications.
In total for the full year, we were awarded 21 platforms of various sizes for electric vehicle applications.
Our non transportation end markets performed strongly in the fourth quarter and on a year over year basis sales increased 25% in total and 21% organically.
Speaker 1: Our non-transportation and markets perform strongly in the fourth quarter and on a year-over-year basis, sales increased 25% in total, and 21% organically.
Speaker 1: Failed in industrial and markets remain robust, driven by demand in areas such as industrial printing and temperature products in pool and staff. We received multiple awards for HBAC applications. Our focus on extending into hot side, temperature sensing applications, such as water heating and industrial cooking appliances, is gaining momentum and we deliver shipments to two new customers.
Sales in industrial end markets remained robust driven by demand in areas, such as industrial printing and temperature products in pool and staff. We received multiple awards for <unk> applications are focused on extending into hot side temperature sensing applications, such as water heating and industrial cooking appliance.
<unk> is gaining momentum and we delivered shipments to two new customers.
We had wins for EMI filtering products.
Speaker 1: We had wins for EMI, FISWI products, measurement transducers, and the virtual reality application.
Measurement transducers and virtual reality applications.
Speaker 1: We also secured an RF reference design win for a new cellular band and extended the contract for a hard disk drive application.
We also secured an RF reference design wins for our new cellular band and extended the contract for hard disk drive application.
While distribution sales are a smaller portion of our total revenues demand remains robust as we continue to track inventory levels.
Speaker 1: While distribution sales are a smaller portion of our total revenues, the man remains robust as we continue to track inventory levels.
Speaker 1: Momentum in our medical and market continues as the extended contracts with three medical ultrasound customers. We also secured a contract for a cataract surgery application and added low volume shipment to two infrared-scimmered customers.
Momentum in our medical end market continues as we extended contracts with three medical ultrasound customers. We also secured a contract for a cataract surgery application and added low volume shipment to two intra vascular customers.
Speaker 1: We continue to secure temperature sensing awards with existing customers ranging from patient monitoring to critical freezer and disposable applications.
We continue to secure temperature sensing awards with existing customers.
Ranging from patient monitoring to critical freezer and disposable applications.
In defence, we continued to strengthen our portfolio of products as we work with research partners and received the sample order for an unmanned underwater autonomous vehicle applications. We.
Speaker 1: In the fence, we continue to strengthen our portfolio products as we work with research partners and receive the sample order for an unmanned underwater autonomous vehicle application. We had several undersea solar winds and added a temperature sensor when for a low orbit satellite application.
We had several undersea solar winds and added a temperature sensor win for a low orbit satellite applications.
Overall, although we anticipate robust demand for non transportation products in the first half of the year, we remain cautious about demand environment in the second half.
Speaker 1: Overall, although we anticipate robust demand for non-transportation products in the first half of the year, we remain cautious about demand environment in the second half.
Turning to slide five.
Our strong balance sheet, which is bolstered by strong cash flow generation.
Speaker 1: Our strong balance sheet, which is bolstered by strong cash flow generation, continues to provide us with a solid foundation as we advance our diversification strategy.
<unk> to provide us with a solid foundation as we advanced our diversification strategy.
Speaker 1: Our capital deployment strategy is focused on supporting organic growth investments, leveraging our financial strength to advance an M&A in alignment with our strategic priorities and returning cash to shareholders.
Our capital deployment strategy is focused on supporting organic growth investments leveraging our financial strength to advance on M&A and alignment with our strategic priorities and returning cash to shareholders.
Speaker 1: We remain committed to more effective capital management while maintaining our discipline approach.
We remain committed to more effective capital management, while maintaining our disciplined approach.
Speaker 1: The investments we've made in the front-end process, including commercial resources and IT capabilities, along with implementing SAP across the organization, have strengthened our foundation and positioned us to execute on our strategy.
The investments we've made in the front end process, including commercial resources and capabilities.
Along with implementing SAP across the organization have strengthened our foundation and positioned us to execute on our strategy.
We continue to build a solid M&A pipeline and are committed to leveraging value, creating acquisitions to accelerate our growth and diversification efforts.
Speaker 1: We continue to build a solid M&A pipeline and are committed to leveraging value creating acquisitions to accelerate our growth and diversification efforts.
We will remain disciplined in our approach focusing on complementary acquisitions that meet our criteria, including enhancing our technology portfolio strengthening customer relationships and expanding products applications end markets and geography.
Speaker 1: We will remain disciplined in our approach, focusing on complementary acquisitions that meet our criteria, including enhancing our technology portfolio, strengthening customer relationships, and expanding products, applications, and markets, and geography.
Speaker 1: The sweet spot continues to be acquisition targets in the range of up to 50 million a year in sales.
The sweet spot continues to be acquisition targets in the range of up to $50 million at year end sales.
However, we remain open to larger opportunities that will advance our long term strategy.
Speaker 1: However, we remain open to larger opportunities that will advance our long-term strategy.
As part of our capital allocation strategy, we continue to return cash to shareholders. This past quarter, we repurchased approximately $4 million of stock as part of the previously announced stock buyback program.
Speaker 1: As part of our capital allocation strategy, we continue to return cash to shareholders. This past quarter, we re-purchase the approximately four million dollars of stock as part of the previously announced stock buyback program.
Moving to slide six at Cts, our purpose is to enable an intelligent and seamless world.
Speaker 1: Moving to slide six, at CTS, our purpose is to enable an intelligent and seamless world.
Speaker 1: Through deeper customer relationships, we play an instrumental role in helping our customers shape the future by designing components and solutions with effective and efficient technologies that make their products smarter. I've already highlighted our skydend supporting sustainable products like electric vehicles and how we play a pivotal role in promoting health and safety by supplying components used in non-vasive surgical devices such as medical ultrasound.
Through deeper customer relationships, we play an instrumental role in helping our customers shape, the future by designing components and solutions with effective and efficient technologies that make their products smarter.
I already highlighted our strides in supporting sustainable products like electric vehicles, and how we play a pivotal role in promoting health and safety by supplying components used in non invasive surgical devices such as medical ultrasound.
We also understand that we have a responsibility to shape not only a smarter future, but one that will be sustainable for future generations.
Speaker 1: We also understand that we have a responsibility to shape not only a smarter future, but one that will be sustainable for future generations.
This begins with making sustainable business choices across our organization that create long term value for our company, our stakeholders and the communities in which we do business we.
Speaker 1: This begins with making sustainable business choices across our organization that create a long-term value for our company, our stakeholders, and the communities in which we do business.
Speaker 1: We've taken a number of actions on our sustainable journey.
We have taken a number of actions on our sustainability journey.
We have expanded our nominating and governance committee to include oversight of our sustainability initiatives.
Speaker 1: We have expanded our nominating and governance committee to include oversight of our sustainability initiative.
We believe strongly in the benefits of diversity. Our board is comprised of directors, who reflected the first set of skills.
Speaker 1: We believe strongly in the benefits of diversity. Our board is comprised of directors who reflected the versatile skills, backgrounds, perspectives and experiences. And we are proud that more than 40% of our board is comprised of female and minority directors.
Backgrounds perspectives and experiences.
And we are proud that more than 40% of our board is comprised of female and minority directors.
On a regular basis, we reinforced our commitment to ethical business practices by conducting ethics and compliance training for all employees.
Speaker 1: On a regular basis, we reinforce our commitment to ethical business practices by conducting ethics and compliance training for all employees.
We established a cross functional ESG steering committee responsible for spearheading the company's sustainability initiatives.
Speaker 1: We established a cross-functional ESG steering committee responsible for spearheading the company's sustainability initiative.
Speaker 1: We continue to support the ongoing development of our employees.
We continue to support the ongoing development of our employees.
Speaker 1: By rolling out several new training programs, including our Advanced Leadership Program,
By Rolling out several new training programs, including our advanced leadership program and.
Speaker 1: And we are continuing our legacy of community outreach and support through the launch of CTS Careers. Our global program designed to support our charge of getting and community involvement initiatives.
We are continuing our legacy of community outreach and support to the launch of Cts cares our global program designed to support our charitable giving and community involvement initiatives.
The Cts cares platform advanced this past quarter as our employees across the globe participated in several community activities and contributed more than 600 hours to community projects.
Speaker 1: the CTS Care platform advanced this task order as our employees across the globe participated in several community activities and contributed more than 600 hours to community projects.
Turning to slide seven summarizing our outlook for the year ahead increased safety automation and efficiency needs will continue to drive demand for Cts solutions are.
Speaker 1: Turning to slide seven, summarizing our outlook for the year ahead, increase safety, automation and efficiency needs will continue to drive demand for CTS solutions.
Speaker 1: Our non-transportation and markets are growing, and we continue to use our core technology and domain expertise to expand our presence across end markets while also finding deeper penetration with current end market applications.
Our non transportation end markets are growing and we continue to use our core technology and domain expertise to expand our presence across end markets. While also finding deeper penetration with current end market applications.
Speaker 1: the pace of recovery in our transportation and market continues to be pressured by ongoing supply challenges and inflation, which are expected to persist in 2022.
The pace of recovery in our transportation end market continues to be pressured by ongoing supply challenges and inflation, which are expected to persist in 2022.
Looking at the U S light vehicle transportation market.
Speaker 1: Looking at the US light vehicle transportation market, the SAR dropped closer to 13 million for 2021, and we expect a 14 to 15 million unit range for 2022.
The Saar dropped closer to $13 million for 2021 and.
And we expect the 14 to 15 million unit range for 2022.
On hand days of supply are still at low levels.
Speaker 1: On hand days of supplier skill at low levels, we expect to see an improving friend throughout 2022.
We expect to see an improving trend throughout 2022.
Speaker 1: European production is forecasted in the 17 to 18 million unit range. China volumes are expected in the 24 million unit range marginally up compared to 2021.
European production is forecasted in the 17 to 18 million unit range chime.
China volumes are expected in the 24 million unit range marginally up compared to 2021.
Speaker 1: The commercial vehicle market remains solid and is likely to remain robust throughout 2022. The biggest challenge to the outlook continues to be the supply of semi-conduct.
The commercial vehicle market remains solid and is likely to remain robust throughout 2022.
The biggest challenge to the outlook continues to be the supply of semiconductors.
Speaker 1: From non-transmutation markets, we continue to expand the customer base and range of applications in industrial, medical, and defense. In some cases, inventory levels are returning to more normal quantities. As a result, although we anticipate robust order levels in the first half of the year, we remain cautious about the demand environment in the second half.
For non transportation markets, we continue to expand the customer base and range of applications in industrial medical and defense and.
In some cases inventory levels are returning to more normal quantities as a result, although we anticipate robust order levels in the first half of the year, we remain cautious about the demand environment in the second half.
We will also continue to track the impact of the supply challenges on our transportation end market.
Speaker 1: We will also continue to track the impact of the supply challenges on our transportation and markets.
In terms of guidance for full year 2022, we are forecasting sales in the range of 525 million to $550 million.
Speaker 1: In terms of guidance for full year 2022, we are forecasting sales in the range of $525 million to $550 million, and adjusted deluded earnings per share in the range of $2 to $225.
And adjusted diluted earnings per share in the range of $2 to $2 25 now.
Now I'll turn it over to Ashish, who will walk us through the financial results in more detail Ashish. Thank you Kieran moving to slide nine.
Speaker 1: Now I turn it over to Ashish who will walk us to the financial results to more detail. Ashish, thank you, Karen. Moving to slide 9.
Fourth quarter sales were $142 5 million.
Speaker 2: Food quarter sales were $132.5 million up 8% compared to the of 2020 and up 8% sequentially from the third quarter.
Up 8% compared to the fourth quarter of 2020 and up 8% sequentially from the third quarter.
Sales to transportation customers declined 3% compared to the fourth quarter of 2020 as supply chain challenges continue impacting us and our customers.
Speaker 2: Sales to transportation customers declined 3% compared to the fourth quarter of 2020 As supply chain challenges continue impacting us and our customers
Speaker 2: sales to other end markets increased 25% year over year as the industrial, medical, aerospace, and defense and markets exhibited double-digit growth.
Sales to other end markets increased 25% year over year as the industrial medical Aerospace and defense end markets exhibited double digit growth sales to the transportation end market increased 19% sequentially driven by improvement in orders from our customers as the industry works.
Speaker 2: sales to the transportation and market increased 19% sequentially, driven by improvement in order from our customers as the industry works through the supply chain challenges.
Through the supply chain challenges.
Speaker 2: changes in foreign exchange rates impacted our revenue favorably by approximately half a million dollars.
Changes in foreign exchange rates impacted our revenue favorably by approximately half a million dollars.
Our gross margin was 36, 7% in the fourth quarter up 200 basis points compared to the fourth quarter of 2020, and down 60 basis points compared to the third quarter of 2021.
Speaker 2: Our growth margin was 36.7% in the fourth quarter, up to 200 basis points compared to the fourth quarter of 2020, and down 60 basis points compared to the third quarter of 2021.
Speaker 2: Our global teams, strong operational execution, helped mitigate some of the impact of margin pressures driven by supply chain shortages and other inflationary factors.
Our global team strong operational execution helped mitigate some of the impact of margin pressures driven by supply chain shortages and other inflationary factors.
Speaker 2: In the fourth quarter, as Cheney and R&D expenses were $29 million or 22% of net sales, versus $25 million or 20% of sales in the fourth quarter of 2020.
In the fourth quarter, SG&A, and R&D expenses were $29 million.
22% of net sales.
Versus $25 million or 20% of sales in the fourth quarter of 2020.
The higher expenses in the quarter were primarily the result of higher incentive compensation expenses and a onetime charge related to the resolution of a legacy environmental matter.
Speaker 2: The higher expenses in the quarter were primarily the result of higher incentive compensation expenses and a one-time charge related to the resolution of a legacy environmental matter.
For the fourth quarter 2021.
Speaker 2: For the fourth quarter 2021, we reported earnings of 28 cents per diluted share. Adjusted earnings for the fourth quarter were 49 cents per diluted share compared to 43 cents per diluted share for the same period last year and 46 cents last quarter.
We reported earnings of 28 per diluted share.
Adjusted earnings for the fourth quarter were 49 per diluted share compared to <unk> 43 per diluted share for the same period last year and 46% last quarter.
Turning to slide 10.
Full year results for 2021 were $513 million.
Speaker 2: Fully a result for 2021 were $513 million, up 21% compared to 2020.
Up 21% compared to 2020.
Speaker 2: Sales to transportation customers increased 18% year over year driven by the recovery in the automotive industry.
Sales to transportation customers increased 18% year over year, driven by the recovery in the automotive industry.
Speaker 2: sales to other end markets increased 25% year over year as the industrial, medical, aerospace, and defense and markets all exhibited year over year strong double digit growth.
Sales to other end markets increased 25% year over year as the industrial medical Aerospace and defense.
End markets, all exhibited year over year strong double digit growth.
Our Ssi acquisition added $7 million in sales in 2021.
Speaker 2: Our SSI acquisition added $7 million in sales in 2021, performing ahead of our expectations.
Farming ahead of our expectations.
Changes in foreign exchange rates impacted our revenue favorably by approximately $6 9 million.
Speaker 2: Changes in foreign exchange rates impacted our revenue favorably by approximately $6.9 million.
Yes.
Speaker 2: We continue to focus on diversifying the business and non-transportation sales were up to 45% of our total sales in 2021.
We continue to focus on diversifying the business and non transportation sales were up to 45% of our total sales in 2021.
Speaker 2: Our growth margin was 36% in 2021, up 320 basis points compared to 2020. Our global teams executed efficiently in the face of significant supply challenges to offset the impact of cost increases and deliver solid profitability improvements.
Our gross margin was 36% in 2021 up 320 basis points compared to 2020.
Our global teams executed efficiently in the face of significant supply challenges to offset the impact of cost increases and deliver solid profitability improvement.
Speaker 2: Supply challenges and inflation are expected to continue impacting us in 2022. However, we continue to work closely with customers to share the cost increases and be a confident in our ability to execute success.
Supply challenges and inflation are expected to continue impacting us in 2022.
However, we continue to work closely with customers to share the cost increases and we are confident in our ability to execute successfully.
For the restructuring program announced in 2020, we have achieved 18 <unk> <unk> of EPS in savings so far.
Speaker 2: For the restructuring program announced in 2020, we have achieved 18 cents of EPS and savings so far.
Due to the robust demand environment and Covid limitation.
Speaker 2: Due to the robust demand environment and COVID limitations, some projects have been delayed. We are on track to achieve the lower end of our targeted annualized EPS savings of 22 to 26 cents at the end of 2022, with additional savings expected in 2023.
Some projects have been delayed.
We are on track to achieve the lower end of our targeted annualized EPS savings of 22 to 26 by the end of 2022.
With additional savings expected in 2023.
SG&A and R&D expenses were $106 million or 21% of sales in 2021 versus $92 million.
Speaker 2: As she and I are in the expenses of $106 million or 21% of sales in 2021. Worse is $92 million or 22% of sales in 2020.
22% of sales in 2020 the.
Speaker 2: The higher expenses in 2021 were primarily the result of full restoration of cost reduction initiative implemented in 2020, and higher incentive compensation expense.
The higher expenses in 2021 were primarily the result of full restoration of cost reduction initiatives implemented in 2020 and higher incentive compensation expenses.
For full year 2021, we reported a loss of $1 30 per share.
Speaker 2: For full year 2021, we reported a loss of $1.30 per share, driven largely by the non-cash pension settlement charge recorded during the year. Adjusted earnings for the full year 2021 were $1.93 per diluted share compared to $1.12 per diluted share for 2020.
Driven largely by the noncash pension.
Pension settlement charges recorded during the year.
Adjusted earnings for the full year 2021 were $1 93 per diluted share compared to $1 12.
<unk> per diluted share for 2020.
Speaker 2: We continue to focus on working capital efficiency and ended the year with 14.4% in controllable working capital.
We continue to focus on working capital efficiency and ended the year with 14, 4% and controllable working capital.
We remain on track to complete the implementation of our SAP ERP system in early 2022.
Speaker 2: We remain on track to complete the implementation of our SAP ERP system in early 2022. A majority of our sites have been running on SAP and we continue to optimize our learning and capability.
The majority of our sites have been running on SAP.
And we continue to optimize our learnings and capabilities.
Speaker 2: As part of our focus 2025 initiative, we are working on a CTS operating system focused on enhancing our continuous process improvement capabilities. And we expect the data available from the new ERP system to be a key enabler.
As part of our focus 2025 initiative, we are working on a Cts operating system focused on enhancing our continuous process improvement capabilities and we expect the data available from the new ERP system to be a key enabler.
Moving to slide 11.
We generated $86 million in operating cash flow for the full year 2021 up 12% compared to 2020.
Speaker 2: We generated $86 million in operating cash flow for the fully at 2021, up 12% compared to 2020.
Speaker 2: Our cash position remains strong with a cash balance of $141 million as of December 31, 2021, up from $92 million on December 31, 2020.
Our cash position remains strong with a cash balance of $141 million.
As of December 31, 2021 up from $92 million on December 31, 2020.
Speaker 2: Our long-term debt balance was $50 million, a slight decrease from $55 million on December 31, 2020. Our debt to capitalization ratio was at 9.7% at the end of the fourth quarter, compared to 11.4% at the end of 2020.
Our long term debt balance was $50 million.
Slight decrease from $55 million on December 31, 2020.
Debt to capitalization ratio was at nine 7% at the end of the fourth quarter compared to 11, 4% at the end of 2020.
In the fourth quarter, we updated our bank credit agreement as part of this process, we addressed the changes related to LIBOR transition.
Speaker 2: In the fourth quarter, we updated our bank credit agreement. As part of this process, we addressed the changes related to LIBOR transition, increased the available credit to 400 million and extended the maturity date to December 20, 26th.
Increased the available credit to $400 million.
And extended the maturity date to December 2026.
Speaker 2: Our available credit and strong cash flow generation provides a fit of solid foundation to pursue M&A opportunities that will advance our diversification strategy.
Our available credit and strong cash flow generation provides us with a solid foundation to pursue M&A opportunities that will advance our diversification strategy.
Speaker 2: This concludes our prepared comments. We would like to open the line for questions at this time.
This concludes our prepared comments, we would like to open the line for questions at this time.
Thank you.
Speaker 3: Thank you. At this time, I would like to remind everyone in order to ask a question, please press star, then the number one on your telephone keypad.
At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.
Our first question comes from Karl Ackerman from Cowen Carl Please go ahead.
Speaker 3: Our first question comes from Carl Ackerman from Cowan. Carl, please go ahead.
Yes, good morning, Ashish and Kieran I hope Youre doing well.
Speaker 4: Yes, good morning, Assession, Karen. I hope you're doing well. I caught two questions at least.
Two questions.
All right go ahead Paul.
You indicated that your visibility is for non transportation markets remains healthy in the first half of 2022.
Speaker 4: Yeah, you indicate that your visibility for non-transportation markets remains healthy in the first half of 2022. Is your conservatism driven by a normalization of channel inventory or order backlog? I think you could just speak to your conservatism for the back half of 2022 for non-transportation markets. That would be very helpful.
What is.
Is your conservatism driven by a normalization of channel inventory or order backlog.
And if you could just speak to your conservatism for the back half of 2020 for non transportation market that would be that'd be very helpful.
Yes Carl.
The primary part of that is coming from the fleet distribution is a smaller portion of our business probably closer to 10%, but we're starting to see inventory levels. They are returned to normal and we think that'll also.
Speaker 1: Primary part of that is coming from the free. Distribution is a smaller portion of our business, probably closer to 10%.
Speaker 1: But we're starting to see inventory levels of their returns normal. And we think that will also have a potential impact on the other end markets that we serve like industrial, medical and defense. We see the strong rebound. We still have good demand at the moment, robust demand at the moment. But it's been strong for quite some time and we just don't have that same level of visibility into the second half of the year. So that's why we're reading a little bit cautious there.
Have a potential impact on the other end markets that we serve like industrial medical and defense. We've seen a strong rebound we still have good demand at the moment robust demand at the moment.
But it's been strong for quite some time and we just don't have that same level of visibility into the second half of the year. So that's why we remain a little bit cautious there.
Speaker 4: So I appreciate that. I guess then moving to automotive, you know, some of your peers quantified a benefit from automotive restocking in calendar 21.
Understood I appreciate that.
I guess, then moving to automotive some of your peers quantified.
A benefit from automotive restocking in calendar 'twenty one.
Speaker 4: Suggested the enjoy restocking may not carry over into 2022. Nevertheless, I think at least half of your automotive businesses on consignment that should better align your supply with end market demand.
The inventory restocking may not carryover into 2022.
Nevertheless, I think at least half of your automotive business is on consignment that should better align your supply with end market demand.
Speaker 4: But is your outlook for low to mid-siguals as your growth and automotive driven by automotive customers indicating your products are now balanced at a high level? Or...
But is is your outlook for low to mid single digit growth in automotive.
Driven by automotive customers, indicating your products are now balance at a high level or.
Are there other factors that we should.
Speaker 4: on the other factors that we should, that may actually drive that growth rate higher, like the adoption of electricity equals, like the adoption of incremental content growth that we may not be appreciating. Thank you.
That may actually drive that growth rate higher likely adoption of electric vehicles like the adoption of <unk>.
Incremental content growth.
We may not be appreciate it thank you.
Speaker 1: So Carl, maybe if you've connons on that, first of all, if you look at the industry reports out there, I just reference IHS.
So Carl maybe a few comments on that first of all if you look at the industry reports out there I just referenced IHS, they're probably predicting global growth rate in the 7% to 9% range.
Speaker 1: They're probably predicting global growth rate in the seven to nine percent range. And that would, the seven percent or so would be top end of our guidance kind of as we would look at it. And on the other hand, the on hand days of supply is pretty low still. So if you look at the North American market, it's still
That was the 7% or so would be top end of our guidance kind of as we would look at it.
On the other hand, the beyond hand days of supply is pretty low still so if you look at the North American market, it's still closer to the 30 days versus 50, plus days of supply of inventory.
Speaker 1: closer to the 30 days versus 50 plus days of supply of inventory. And so we should have some strength there, same for Europe . I think China performs strongly this past year, and we think that'll be more flat this year. So that's our view on the transportation market.
So we should have some strength there.
Same for Europe , I think China performed strongly this past year, and we think that will be more more flat. This year. So that's our view on the on the transportation market.
Currently.
Speaker 2: Carl, the expectation that we are providing for 2022, we are also building in potential upside as the supply chain recovers on the higher end of our estimate. But we are also watching carefully any COVID-related disruptions and that could push us to the lower end of our range. So that's kind of how we are looking at the range of sales.
Expectation that we are providing for 2022.
Also building in potential upside as the supply chain recovers on the higher end of our estimate but we're also watching carefully any COVID-19 related disruptions and that could push us to the lower end of our range. So that's kind of how we are looking at the.
Our range of sales.
Understood a very appreciate it thank you.
Thank you Carl.
Speaker 3: Thank you, Carl. The next question comes from Justin Long of Stevens. Justin, please go ahead. Thanks.
The next question comes from Justin Long of Stephens Justin. Please go ahead.
Thanks, and good morning.
Hi, Justin.
Speaker 4: I'm giving the first half, first and second half commentary. Is she, is there any way you could give us a little bit more color on what your guidance is baking in for revenue and earnings in the first half, first and second half, as we just think about the cadence?
Given the first half versus second half commentary Ashish is there any way you could give us a little bit more color on what your guidance is baking in for revenue and earnings in the first half versus the second half if we just think about the cadence.
Justin.
Speaker 2: just in the, the first heart of
The first half.
On a year over year basis should look okay in terms of growth rate.
Speaker 2: On a year over your basis, should look okay in terms of growth rate. And in the second half, I would expect us to be more flatish compared to...
And in the second half I would expect us to be.
More flattish compared to 2021.
Speaker 2: And that's kind of what we are expecting on the distribution side, on the non-transportation side.
And.
That's kind of what we are expecting.
On the distribution side on the non transportation side.
Speaker 2: is where we see the more challenging situation or lack of visibility.
Is where we see the.
More challenging situation or lack of visibility.
Speaker 2: And as Kieran mentioned, transportation could be gradually improving during the year, as hopefully the surviving situation continues to improve. So...
And as Karen mentioned transportation could be gradually improving.
During the year and hopefully the supply chain situation continues to improve so.
Speaker 2: the transportation we would expect to see gradual improvement through the year.
The transportation, we would expect to see gradual improvement through the year.
And on the non transportation side, we would see a stronger first half and then may be more constrained second half primarily due to demand just in just one other thing to add what she has commented on if you look at the electronics component side of things.
Speaker 1: And on the non-transportation side, we would see a stronger first half and then maybe more constrained second half, primarily due to demand. Just one other thing to add, what she's coming to down, if you look at the electronics component side of things and you look at other companies as well, the book to Bill Rates has been really high in the last six to 12 months and it's gonna be challenging for that to continue at those kind of levels.
When you look at the companies as well the book to Bill rates have been really high in the last six to 12 months and it's.
It's going to be challenging for that to continue with those kind of levels.
Understood and Ashish just to clarify one comment you made about the second half when you talked about.
Speaker 5: understood and she's just to clarify one comment you made about the second half when you talked about The year-over-year year-trend being kind of flatish is that a comment about revenue EPS or both
Year over year trend being kind of flattish is that a comment about revenue EPS or both.
Speaker 2: I was focusing on revenue primarily just in.
I was focusing on revenue primarily Justin.
Speaker 2: And the EPS will obviously get impacted to some extent from the revenue. And obviously, we are continuing to work on various improvements in our cost.
And the EPS will obviously get impacted.
To some extent from the revenue and obviously, we are continuing to work on.
Various improvements in our cost structure.
Okay, Great that's helpful and going back to the supply chain you mentioned.
Speaker 5: Okay, great, that's helpful. And going back to the supply chain, you mentioned in the earlier question that the guidance on the high end assumes the supply chain recovers. I was wondering if there was a way to kind of break out for us how much of a headwind the supply chain was in 2021 when you look at the full year and what you're expecting that number to look like in 2022.
On the earlier question that the guidance on the high end assumes the supply chain recovers I was wondering if there was a way to kind of break out for us how much of that headwind that supply chain wide in 2021, when you look at the full year and what you're expecting that number to look like in 2022.
Speaker 1: you know i would have going into the exact numbers the she shall that you talk about in a second but just that you look at 2021 i think and production bills were impacted by about ten million uh... uh... because of the senate conductor shortages
Without going into the exact numbers Ashish that you talk about in a second but just if you look at 2021 I think.
Production builds were impacted by about $10 million.
Because of the semiconductor shortages if you look at this year. So far we see at least 1 million out there in the different reports that youll see out there.
Speaker 1: If you look at this year so far, we see at least one million out there in the different reports that you'll see out there, with some indication saying that one million could be at highest, four million. So it's a bit of a designic environment at the moment.
With some indications, saying that 1 million could be as high as $4 million. So it's.
Net of a dynamic environment at the moment Ashish.
Speaker 2: And the other side of the supply challenges is obviously the cost side of it. If you recall in one of our calls last year we talked about in the range of roughly $2 million a quarter of cost pressure.
And the other side of the supply challenges is obviously the cost side of it.
If you recall in <unk>.
One of our calls last year, we talked about in the range of.
Roughly $2 million a quarter of cost pressure.
Speaker 2: We are not expecting the same level, but we are expecting similar levels of cost pressure and slightly better, but still similar levels of cost pressure in 2022.
We are not expecting the same level, but.
Our expecting similar level of cost pressure and.
Slightly better, but still similar levels of cost pressure in 2022. So that's the other side that we are watching very carefully Justin.
Speaker 2: So that's the other side that we are watching very carefully, just in and our goal is to share that cost burden with our customer base. And that's built into our EPS ranges as well, depending on how much of that. As you know, it's much harder to get price increases on the transportation side.
Our goal is to share that cost burden with our customer base.
And that's built into our EPS range as well depending on how much of that as you know it's much harder to get price increases on the transportation side.
Understood and lastly on the buyback is that something thats getting factored into that 2022 guidance.
Speaker 5: understood and lastly on the buyback is that something that's getting factored into the 2022 guidance?
The 2022 guidance a buyback.
Speaker 2: The 2022 guidance, our buyback is not a very big amount of buyback in any given year. So we are assuming a modest impact, but nothing significant just.
Not a very big amount of buyback in any given year.
So we are assuming a modest impact, but nothing significant Justin.
Speaker 5: Okay, and I'm assuming nothing from amenade is factored in the guidance as well. That is correct. Okay, perfect. That's all.
Okay, and im assuming nothing from M&A and factored in the guidance as well.
That is correct.
Okay perfect. That's all I had I appreciate the time.
Thank you.
Thank you Justin.
The next question comes from John <unk> from Sidoti Sean. Please go ahead.
Speaker 3: The next question comes from John Fanzrepp from Sudotti. John , please go ahead.
It seems what I'm trying to get our heads around the second half commentary.
Speaker 4: As soon as we're trying to get our heads around the second half commentary, it sounds to me that you're using your distribution business as a leading indicator. Or is it the case we actually see diminishing orders in a particular head market that give you real concern?
It sounds to me that you're using your distribution.
Business as a leading indicator.
Or is it a case, where you actually see diminishing orders and in particular, our head market that give you real concern.
So.
Speaker 1: So, John , as we said, on transportation, the demand is there to solve that supply chain. On the non-transportation outside of distribution, and the order level is good. It's strong, it's robust.
John as we said transportation the demand is there it's all about supply chain.
On the non transportation outside of distribution.
The order level is good it's strong it's robust.
We have good visibility through the first two quarters harder to have visibility beyond that so that's where our concern comes in and as I mentioned earlier.
Speaker 1: We have good visibility through the first two quarters, harder to have visibility beyond that, so that's where our concern comes in. And as I mentioned earlier, the book to Bill rates out there for a lot of businesses have been very high, and that's got to normalize a little bit. At the same time, I will tell you, we're making determined efforts to add new customers, new applications.
The book to Bill rates out there for a lot of businesses have been very high and that's going to normalize a little bit at the same time I will tell you, we're making determined efforts to add new customers new applications. So we are driving our business going forward, we're not looking to.
Speaker 1: So we are driving our business going forward. We're not looking to, you know, it's not our goal to be flat. We want to do better by, it's, it's, it's, it's, and step by step.
It's not our goal to be flat, we wanted to do better but it's.
It's.
Step by step and progress.
Would you typically have visibility into the second half with your non transportation business at this point of the year.
Speaker 4: here and we typically have visibility into the second half with your non-transportation business at this point of the year.
Am.
Speaker 1: Not full visibility, John , for sure. And I think our...
Not not a full visibility John for sure.
I think our caution is on the high level of bookings we've seen over the last several quarters, that's really why we're being a little bit more cautious here.
Speaker 1: caution is on the high level of bookings we've seen over the last several quarters. That's really why we're being a little bit more cautious here. And again, on the other point that you asked about with distribution, and we see some levels returning to normal, and we've seen maybe one or two cases of situations that there where we think it could be a little bit of a build-up of inventory, but that's got something we're still??? find a car at like.
And again the other point that you asked about with distribution and we see we see some M levels returning to normal and we have seen and maybe one or two cases of situations out there, where we think there could be a little bit of a buildup of inventory, but that's not something we're still trying to clarify.
Okay, and you mentioned new customers. That's number one my question when you think about the new orders and the new wins that you're getting are you seeing a particular customer customer in particular actually.
Speaker 3: Okay. And you mentioned new customers and I've actually not one of my questions. When you think about the new orders and the new wins that you're getting, are you seeing a particular customer customer in particular actually?
Gravitating to your products more so than another or maybe a specific market, having a better success than others.
Speaker 3: gravitating to your products more so than another or maybe a specific market we've had a better success and hit rate than others.
And I would say John that our ceramic product line has been strong and gaining new customers and new applications.
Speaker 1: I would say, John , that our ceramic product line has been strong and gaining new customers and new applications. We talked about, in our compared remarks about investments in the front end, we've got a lot of investment there. We have some more to do across the rest of the business. That product line in particular is that we've got three different technologies, one of the few companies in the world that have that. We go across multiple and markets, our R&D capability
We talked about in our prepared remarks about investments in the front end, we've done a lot of investment there we have some more to do across the rest of the business, but that product line in particular is.
We've got three different technologies, one of the few companies in the world that have that rig.
We go across multiple end markets or our R&D capability is.
Speaker 1: is leverage across industrial, medical and defense. So that's something that really helps us in that area as well.
Is leveraged across industrial medical and defense. So that said, that's something that really helps us in that area as well.
Okay.
Speaker 3: And you mentioned the potential of something that enable for those $2 million per quarter of incremental gross margin pressure expectations this year. Is that before pricing initiatives or is that a net number kind of expectation this year?
You mentioned the potential.
Something their neighborhood.
$2 million per quarter.
Incremental.
Gross margin pressure expectations. This year is that before pricing initiatives or is that a net number kind of expectation this year.
So John the $2 million per quarter was roughly what we experienced last year.
Speaker 2: So, John , the 2 million per quarter was roughly what we experienced last year. This year we are expecting incremental, not quite 2 million, slightly better, but still on the range of 1.5 to 2 million of incremental cost pressure. That is before the price increase.
Right.
<unk> incremental not quite 2 million slightly better but still on the on the.
In the range of one and half to 2 million of incremental cost pressure that is before the price increases.
And what's.
Speaker 3: And after what's the leg to price increases and realization of those benefits?
Whats the lead to price increases in utilization of those benefits.
Speaker 2: We've, we've, our team's already working on it, John . You know, it takes a little bit of time to work through those discussions. And obviously those are extremely tough discussions, even more so on the transportation side.
Our teams are already working on it John .
It takes a little bit of time to work through those discussions.
And obviously those are extremely tough discussion.
Even more so on the transportation side.
Speaker 2: with every single customer, wherever you have to have those discussions, it just takes a tremendous amount of effort to get through those discussions and...
With every single customer you have to have those discussions or just.
Takes a tremendous amount of effort to get.
Through those discussions and.
Continued to maintain or hopefully even build on those relationships that are so important to us.
Speaker 2: continue to maintain our hope even build on those relationships that are so important to us.
Okay, and as far as the restructuring savings.
Speaker 3: Okay, and installs the restructuring savings. You push them out into 2023. Is that going to be realized in the first half of 2023? You don't tell them take it the four year to get there.
Put some of it out into 2023 is that going to be realized in the first half of 2023 and the full year to get there.
Speaker 2: We are thinking we should be able to achieve them probably closer to the third quarter, John . But again, the situation is a little bit fluid, the given, it's primarily on the ceramic site that it has some delays and the demand is pretty strong.
We are thinking we should be able to achieve them.
Probably closer to the third quarter John .
But again the situation is a little bit fluid, but given.
It's primarily on the ceramic side that <unk> had some delays and the demand is pretty strong and which is the primary reason we have slowed down the transition so.
Speaker 2: And which is the primary reason we have slowed down the transition. So it's some time in the second half of 2023, we should be able to achieve. And we are looking for another two to three cents in 2023. Got it. Thanks.
Sometime in the second half of 2023, we should be able to achieve and we are looking for another two to three.
In 2023.
Got it thanks for taking my question guys good quarter.
Excuse me thank you.
Speaker 3: Thank you, John . The next question comes from Hendy Sistano from Gabelli Fund. Hendy, please go ahead.
Thank you John the next question comes from Hendi <unk> from Gabelli Fund Hendi. Please go ahead.
Update.
Okay.
NDA there.
Andy we're going to need you to come closer to the microphone. If you would like to ask a question on April <unk>.
Speaker 4: Henry would you need you to come closer to the microphone if you would like to ask a question. I'm able to hear you.
Unfortunately, yes.
Hendi you are coming through now but in the line is still pretty faint.
Speaker 2: Handy, you're coming through now, but the line is still free paint. Oh, okay.
Okay I'll call back to.
Nonetheless et cetera.
Speaker 2: No, no, is that resigned now? It's very good now. It's fine now, sorry. OK. So as you can see, yes, the report positive improvement in gross margin and operating margin in 2021. The gross margin of 36% in 2021 is commendable.
Very good now its final sorry, okay.
Thank you Ron So Cts delivered positive improvement in gross margin and operating margin in 2021.
Margin of 36% in 2021 is commendable.
How should we be thinking about gross margin and operating margin in 2022.
Speaker 2: How should we be thinking about GOS margin and operating margin in 2022? They are margin pressure, price increases, profit and benefit of restructuring. I'm wondering whether that 36% GOS margin is sustainable.
Our margin pressure price increases coffee and benefit of restructuring I'm wondering whether that 36% gross margin is sustainable.
So hendi.
Speaker 2: So, Hindi, you know, the expectation on growth margin like we talked about will have an impact of the inflation, a little bit of mech, price increases that we are working on. Our goal is to continue building on our growth margin level. But, you know, we typically talk about a range of growth margin and we look at
The expectation on gross margin like we talked about.
We'll have an impact of the inflation a little bit of mix.
Price increases that we are working on.
Call is to continue building on our gross margin levels.
But.
We thought we typically talk about a range of gross margin and we look at.
Speaker 2: The range expected range of gross margin to be between 34 and 38 percent. We used to say 34 to 37, we are expanding that to 38.
The range expected range of gross margin to be between 34, and 38% we used to say 34 to 37, we're expanding that to 38.
Speaker 2: As we continue working through the year, we want to clarify that more. Again, if we are in...
As we continue working through the year.
We want to clarify that more again.
If we are able to get better price increases I would expect us to continue.
Speaker 2: better pricing increases. I would expect us to continue building on that gross margin, otherwise we might be slight pressures.
Building on that gross margin, otherwise, we might see slight pressures.
Speaker 2: And that's the range of EPS that we have built in in our guidance at this time. Karen, did you want to add something? Yeah, just to add a sheesh, Henry.
And Thats the range of EPS that we have built in in our guidance at this time, Kevin did you want to add something yes, just to add Ashish hendi.
Speaker 1: This year and just like the past year, it's very dynamic, it's very challenging. You know, the headwinds are coming in every direction and our teams have done a standing work just in terms of sourcing and getting new supplies. But what I do want to emphasize, not just for this year, but for the longer term, you know, we said we want to get our margins so should the 37 and 38% and that's our goal. So the top year this year just...
This year and just like the past year. It is very dynamic it is very challenging.
Headwinds are coming in every direction and our teams have done outstanding work to just in terms of sourcing and getting new supplies, but what I do want to emphasize not just for this year, but for the longer term.
We've said, we want to get our margins closer to 37%, 38% and that's our goal. So the tough year. This year just like last year.
I see.
Speaker 3: And I see any insight by the tax rate will be lower in 2022. Like we know that you have been working on several projects that may benefit the tax structure.
And in fact by the tax rate will be lower in 2022.
Now that you've been working on.
Several projects that may benefit the tax.
Structure.
Yes, so we had some unusual items in the fourth quarter, which took our tax rate higher and earlier in the year and the higher tax rate was driven by the impact of the.
Speaker 2: Yes, so we had some unusual items in the fourth quarter, which took our tax rate higher. And earlier in the year and the higher tax rate was driven by the impact of the loss that we recorded on the pension plan.
Loss that we recorded on the pension plan.
Speaker 2: And again, that was a non-cash charge. So once we remove those, we are actually expecting a slight increase in the 2022 tax rate as the mix of our income changes, depending on which country the income is coming from. So that has a slight impact on our tax rate.
And again that goes the noncash charge so once we remove those.
We are actually expecting a slight increase in the 2022 tax rate.
The mix of our income.
Changes, depending on which country. The income is coming from so that has a slight impact on our tax rate.
Thank you and my last question, so how should we view the opportunity.
Speaker 6: and I'm curious on my last question. So how should we view the opportunity in EV? Do you have like updates for 2022?
Like do you have updates for 2022.
And Hendi as we said in our prepared remarks for 2021.
Speaker 1: And, Hendy, as we said in our prepared remarks for 2021, we secure 21 platforms of various sizes. And, you know,
Secure 21 platforms of various sizes.
Yes.
Large portion of our product portfolio there is.
Speaker 1: large portion of our product portfolio there is a propulsion agnostic. And on the same time, we're working in new products like current sensing, which one of those products would be going into production here in the next 12 months, which is very important for each.
Propulsion agnostic and at the same time, we're working on new products like current sensing, which one of those products will be going into production here in the next 12 months, which is a very important for evs.
Speaker 1: We're in the pre-development stage on e-break applications as we go more towards the link to ADAS on that side of it with the break and the break going by wire.
We are in the pre development stage on E brake applications as we go more towards the.
And linked to aid us on that side of it with the break in the breakdown by wire. So theyre, just one or two examples in transportation and we have some others.
Speaker 1: So they're just one or two examples in transportation and we have some others on a path of safety sensing as well. So we feel good about it. And we'd like to keep improving the content that we have there. Thank you, guys.
Passive safety sensing as well so we feel good about it and we'd like to keep improving.
The content that we have there.
Thank you Andrea Thank you Kieran.
Thanks, Andy Thanks, Andy.
Thank you for that question.
Speaker 3: Thank you for that question. Next question comes from Richard Glass, from Glass Capital Management. Richard, please go ahead.
Next question comes from Richard Glass from Glass Capital Management, Richard Please go ahead.
Speaker 4: Hey guys, next quarter here, next year, overall. Thanks.
Hey, guys nice quarter here nice year overall.
Thank you Richard Thanks, Richard.
So.
Speaker 4: So one thing I want to clarify, I've related to that last question on gross margins. You would say 34 to 37% historically or feels like forever. And now you're talking about 38. Should we move up to lower end of that? Should it be 35 to 38? Is that a reasonable thing to think about going forward?
One thing I want to clarify related to that last question on gross margin you had said 34 to 37.
<unk> historically feels like forever.
And now you are talking about 38 to remove up the lower end of that because it would be 35% to 38 is that a reasonable thing to think about going forward.
Speaker 2: We have evaluated that literature. We just want to build a little bit more confidence. Things that continue to impact us on a regular basis. We've talked about the inflationary pressures, the experiencing currency movements can also have a sizable impact on our growth margin. So we're just being a little cautious there, but our goal is to be on the higher end of that range.
And we have evaluated that Richard we're just going to build a little bit more confidence.
Thanks.
Continue to impact us on a regular basis, we've talked about the inflationary pressures we are experiencing.
Currency movements can also have a sizable impact on our gross margin. So we're just being a little cautious there but.
Our goal is to be on the higher end of that range.
Speaker 4: I got so yeah, I found that you guys are being conservative overall, which is maybe very conservative and that's fine. Do you guys have any large programs which roll off in the next couple of years? Is there anything that's particularly meaningful in your book of business that?
Hi, guys.
And like you guys are being conservative overall.
To be very conservative and that's fine.
Do you guys have any large programs, which roll off in the next couple of years.
There anything thats, particularly meaningful in your book of business that.
The sort of pig in the Python neighborhood, yes, we should think about.
Speaker 3: is a sort of pig in the pipe on, maybe that, yeah, we should think about it.
No I don't think so Richard I mean, we spoke a few years ago about hard disk drive winding down and it's a very small portion of our business today, we have some larger platforms, where we've secured next generation awards. So theres. Good continuity there there's always a risk of competition and second sourcing, but we feel like we are.
Speaker 1: No, I don't think so, Richard. I mean, we spoke a few years ago about hard-distance drive winding down and it's a very small portion of our business today. We have some larger platforms where we've secured next generation awards. So there's good continuity there. There's always a risk of competition and second-source thing, but we feel like we're securing the right level.
Securing the right levels.
Speaker 2: Okay. And I should go ahead please. Go ahead.
Okay and Richard.
Go ahead Keith.
No go ahead I was going back a different question.
Speaker 5: So, though I had out, I was gonna have to take some questions, so if you wanna flush that out.
If you want to flesh that out.
Speaker 2: Yeah, we have a normal turn. We have different platforms going off and new ones coming on every year. So we're not expecting an unusual level of downward activity.
Yes, we have a normal churn we have different platforms going off and new ones coming on every year. So we are not expecting an unusual level of download activity.
Okay. So there's always a leaky bucket that you have to fill up with new business, new programs et cetera, but there is nothing particularly meaningful I guess, what im wondering is given the level of.
Speaker 4: Okay, so it's always a leaky pocket that you have to fill up with new business new programs, etc. but there's nothing particularly meaningful. I guess where I'm wondering is given the level of
New business wins, which has been fantastic for like the last year at least in terms of.
Speaker 4: new business wins, which has been fantastic for like the last year, at least in terms of new programs, new orders, new customers, booked to build, all of these metrics are looking really good and very strong numerically and just fundamentally overall. What I'm wondering is, is very, you guys have talked about a mid single digit growth rate.
New programs, new orders, new customers book to Bill.
All of these metrics are looking really good and very strong.
<unk> and <unk>.
Just fundamentally overall.
What I'm wondering is.
Is there a.
You guys have talked about a mid single digit growth rate.
For a long time now organically.
Speaker 4: and given the pace of new wins and the book to bill, et cetera, without any major programs coming off, is there a point in time we should maybe be thinking about a high single digit growth rate, or is this just a particularly robust period and we're gonna get back to normal times, though a pandemic isn't exactly normal times either, I guess. So is that possible looking forward?
And given the pace of new wins, and the book to Bill et cetera.
Without any major programs coming off is there a point in time, we should maybe be thinking about a high single digit growth rate.
Or is this just a.
Particularly robust period, and we're going to get back to normal times.
No.
Pandemic isn't exactly normal times, either I guess so.
Is that possible looking forward.
So Richard.
Speaker 1: So Richard, two things to your question. Number one, we're obviously striving to grow more and better organically and confident with acquisitions. That's how we get to our 10%. If you look at the strong wind this year, and we were really pleased with the level of the winds and the non-transportation side as well as the transportation. But just a little bit of a commentary on the transportation side.
Two things to your question number one we're obviously striving to grow more and better organically and complemented with acquisitions Thats, how we get to our 10%. If you look at the strong wins this year.
And we were really pleased with the level of the wins in the non transportation side as well as the transportation, but just a little bit of them.
Commentary on the transportation side, some quarters in 2020 because of the pandemic that sourcing level was a little bit lower because our customers were delaying some platform changes or new awards. So there's a little bit of tempering in that but overall our goal is to do better than 5%.
Speaker 1: some quarters in 2020 because of the pandemic, that sourcing level was a little bit lower because our customers were delaying some platform changes in new awards.
Speaker 1: So there's a little bit of tempering in that, but overall, our goal is to do better than the 5%.
Okay. So.
Speaker 4: Okay, so I guess without you guys committing it down, but it's possible, but no one's committing today to it. And we should just think about that for our percent.
Yes, without you got permitting it sounds like it's possible, but no one's committing to it.
We should just think about that 5%.
In terms of the M&A pipeline would you say it's changed at all.
Speaker 4: In terms of the M&A pipeline, would you say that it changed it all? You know, is it...
Is it.
More robust less robust given what's going on maybe with.
Speaker 4: More robust, less robust, given what's gone on, maybe with interest rates growing up, there's been any change in the attitudes of sellers.
Interest rates going up has there been any change.
In the attitudes of sellers.
Two things I would say that valuations haven't changed significantly at all.
Speaker 1: Two things I would say that valuations haven't changed significantly at all. And one of the good tell you is we've got a stronger focus on that, stronger emphasis and put some more extra resources on it and they're working very diligently in the area because we see it as we've got to leverage some of the balance sheet capability.
I would tell you is we've got a stronger focus on that stronger emphasis and put some more extra resources on it and they are working very diligently in the area because we see it as we got to leverage some of the balance sheet capability.
Speaker 4: Okay. Alright. Thanks a lot, guys. Good call. You're welcome. Thank you.
Okay, alright, thanks, a lot guys good quarter.
Youre welcome. Thank you chip.
Thank you Richard.
Speaker 3: There were no further questions at this time. If you would like to ask a question, please press star followed by one on your telephone keypad.
There are no further questions at this time.
We'd like to ask a question. Please press star followed by one telephone keypad.
As there are no further questions I would now like to hand, the conference back over to Mr. Sullivan attend the conference back over to you.
Speaker 3: As there are no further questions, I would now like to hand the conference back over to Mr. O'Sullivan, attend the conference back over to you.
Thanks, Dave and thank you all for your time in conclusion, despite a challenging macroeconomic environment, we achieved strong financial results unmet meaningful progress on our new business Awards I am proud of our global team for rising to the challenge and demonstrating operational excellence Cts is well positioned for growth in 2022.
Speaker 1: Thanks, Bailey, and thank you all for your time. In conclusion, despite a challenging macroeconomic environment, we achieved strong financial results that made many progress on our new business award.
Speaker 1: I'm proud of our global team for writing to the challenge and demonstrating operational excellence. CTS is well positioned for growth in 2022, driven by the demand for increased automation, connectivity and energy efficiency and supported by global teams, whose deep expertise in custom engineering solutions, fuel content growth across our customer base, as we continue to move up the value chain for our global stakeholders. We want to thank you all for joining us today. This concludes our call.
Two driven by the demand for increased automation connectivity and energy efficiency and supported by global teams, who has deep expertise in custom engineering solutions fuel content growth across our customer base as we continue to move up the value chain for our global stakeholders. We want to thank you all for joining US today. This concludes our call.
<unk>.
This concludes today's conference call you may now disconnect your lines.
Speaker 1: Disconclude to this conference call, you may now disconnect your line.
Okay.
Speaker 7: Pro right, pro C.
Okay.
Okay.
Okay.