CTS Corporation (NYSE:CTS) Q3 2018 Earnings Conference Call Transcript

Oct 25, 2018 • 11:00 am ET

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CTS Corporation (NYSE:CTS) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen. Welcome to the CTS Corporation Third Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to hand things over to Kieran O'Sullivan, CEO. Please go ahead, sir.

Executive
Kieran M. O'Sullivan

Thank you, Lisa. Good morning, and thank you for joining us today and welcome to CTS's Third Quarter 2018 Conference Call. The following are some notable items for the quarter. Third quarter sales were $118.9 million, up from $106.2 million in the same period last year. Gross margins were 35.4% compared to 35.3% in the third quarter of last year.

Adjusted earnings per share were $0.39 versus $0.31 in the same quarter of 2017, a 26% improvement. Total book-to-business increased to 1.83 billion, and we added three new customers in the quarter. The transition of our manufacturing operations is on track with the consolidation of our Illinois locations and the end of production in Elkhart this year.

Ashish Agrawal is with me for today's call and will take us through the Safe Harbor statement. Ashish?

Executive
Ashish Agrawal

(Forward-Looking Cautionary Statements)

To the extent that today's discussion refers to any non-GAAP measures under Regulation G, the required explanations and reconciliations are available in the Investor section of the CTS website.

I will now turn the discussion back over to our CEO, Kieran O'Sullivan.

Executive
Kieran M. O'Sullivan

Thank you, Ashish. Third quarter sales were $118.9 million, up 11.9% compared to the same quarter last year. Automotive sales improved by 9.6%, driven primarily by share gains in actuators and accelerator pedals. Electronic component sales increased by 15.9%, driven by demand for ceramic products in various end markets. We saw strength in EMI filters and precision frequency solutions in Oil & Gas applications and RF filters with the new customers we announced earlier this year.

We also saw increased demand for our mechanical switch portfolio manufactured in our Kaohsiung, Taiwan factory. These products are tariff-free into the U.S. market, in contrast to some of our China-based competitors. We continue to win new customers as we advance our vision of being a leading provider of sensing and motion devices and connectivity components.

We added three new customers in the quarter, two of them were in China, providing a new accelerator pedal for an EV platform with one, and an actuator application with the other. We are very pleased to report the addition of the second actuator customer, which has been a goal for us.

We also secured a win with a telecom Tier one customer based in Europe for a base station application. We ended the quarter with a total booked business of 1.83 billion, up from 1.0 billion in the second quarter. We had a good quarter with wins in the market, driven primarily by several awards for accelerator pedals. I am pleased to say that one of the two platform wins in Europe is for an EV application. The other platform win was in China. We received four awards for sensor products, two in North America and two in Asia,