CTS Corp (CTS) 2023 Q4 法說會逐字稿

Hello, everyone, and welcome to the CTS Corporation Fourth Quarter 2023 conference call. My name is Daisy, and I'll be coordinating your call today. If you would like to register a question, please press star one on your telephone keypad. I would now like to hand over to your host, Kevin Sullivan, CEO again, Kevin, please go ahead.

大家好，歡迎參加 CTS 公司 2023 年第四季電話會議。我叫黛西，今天我將協調您的電話。如果您想登記問題，請按下電話鍵盤上的一號星星。現在我想把會議交給主持人凱文·沙利文（Kevin Sullivan），再次擔任首席執行官，凱文，請繼續。

Great.

偉大的。

Thank you, Dave, and good morning and thank you for joining our fourth quarter and full year 2023 earnings call. We continued to experience soft demand in the industrial distribution and commercial vehicle markets as outlined in our last earnings call, the light vehicle market is more stable across medical and defense. We saw good growth and see continued momentum in the year ahead. We are committed to a disciplined capital structure focused on supporting organic growth, strategic acquisitions and returning cash to shareholders. Our Board recently approved a $100 million share repurchase program that replaces our existing program authorized in February 2023.

謝謝戴夫，早安，感謝您參加我們的 2023 年第四季和全年財報電話會議。正如我們在上次財報電話會議中所概述的那樣，我們繼續經歷工業分銷和商用車市場的疲軟需求，醫療和國防領域的輕型車輛市場更加穩定。我們看到了良好的成長，並看到未來一年的持續成長勢頭。我們致力於建立嚴格的資本結構，專注於支持有機成長、策略性收購和向股東返還現金。我們的董事會最近批准了一項 1 億美元的股票回購計劃，該計劃取代了我們於 2023 年 2 月批准的現有計劃。

Ashish will now take us through the Safe Harbor statement.

阿什什現在將帶我們了解安全港聲明。

As usual, I would like to remind our listeners that this conference call contains forward-looking statements These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Additional information regarding these risks and uncertainties is contained in the press release issued today, and more information can be found in the Company's SEC filings. To the extent that today's discussion refers to any non-GAAP measures under Regulation G. The required explanations and reconciliations are available at today's earnings press release and supplemental slide presentation, which can be found in the Investors section of the CTS website. I will now turn the discussion back over to our CEO, Kieran O'Sullivan.

像往常一樣，我想提醒我們的聽眾，本次電話會議包含前瞻性陳述，這些陳述受到許多風險和不確定性的影響，可能導致實際結果與前瞻性陳述中表達的結果有重大差異。有關這些風險和不確定性的更多資訊包含在今天發布的新聞稿中，更多資訊可以在公司向 SEC 提交的文件中找到。今天的討論涉及 G 條例下的任何非 GAAP 措施。所需的解釋和調節可在今天的收益新聞稿和補充幻燈片演示中找到，這些內容可以在 CTS 網站的投資者部分找到。現在我將把討論轉回給我們的執行長基蘭·奧沙利文 (Kieran O'Sullivan)。

Thanks, Ashish. Overall, 2023 was a challenging year. We finished with sales of $125 million in the fourth quarter, a decline of 12% from the fourth quarter of 2022. For the full year, sales were $550 million, down 6% from 2022. For the full year, non-transportation sales were down 12% and Transportation sales were down 1% from last year. Customer demand remained soft as expected in the fourth quarter. Our book-to-bill rate was 0.96 in the fourth quarter and 0.97 for the full year. I want to thank our teams for their support as we carefully managed operating expenses while we navigated the challenging revenue environment, particularly in the fourth quarter of 2023, we expect a soft revenue environment in the first quarter of 2024, similar to the last quarter. Adjusted gross margin in the fourth quarter was 34.2%, down 215 basis points, partially driven by the impact of lower volumes this quarter and the mix shift to TRANSPORTATION. Full year adjusted gross margin was 34.8%, down 177 basis points versus 2022, we expect some cost pressures to persist in 2020 for especially for certain materials and from labor cost increases. We expect pricing pressure to return, particularly in the transportation markets. We remain confident in our ability to drive costs in our supply chain and manufacturing sites to improve our operational performance and profitability.

謝謝，阿什什。整體而言，2023 年是充滿挑戰的一年。我們第四季的銷售額為 1.25 億美元，比 2022 年第四季下降 12%。全年銷售額為 5.5 億美元，較 2022 年下降 6%。全年非交通運輸銷售額較去年同期下降 12%，交通運輸銷售額較去年同期下降 1%。第四季客戶需求仍如預期疲軟。我們第四季的訂單出貨比為 0.96，全年為 0.97。我要感謝我們的團隊的支持，因為我們在應對充滿挑戰的收入環境的同時，小心管理了營運費用，特別是在2023 年第四季度，我們預計2024 年第一季度的收入環境將與上季度類似。第四季調整後毛利率為 34.2%，下降 215 個基點，部分原因是本季銷售下降以及業務轉向運輸的影響。全年調整後毛利率為 34.8%，較 2022 年下降 177 個基點，我們預期 2020 年將持續存在一些成本壓力，特別是某些材料和勞動成本增加。我們預期價格壓力將會回歸，特別是在運輸市場。我們對降低供應鏈和製造基地成本以提高營運績效和獲利能力的能力仍然充滿信心。

Fourth quarter adjusted diluted earnings per share of $0.47 were down $0.09 from the same period last year. Full year adjusted diluted earnings per share of $2.22 decreased $0.24 from 2022 later, Ashish will add further color on our financial performance. Although 2023 was a challenging year, we continued to make significant progress executing our long-term strategy. Our focus on profitable growth, driving diversification through our Advanced Materials capability and growth through electrification in mobility, markets with innovative new products remain our highest priorities. During 2023, we made solid progress across our non-transportation end markets in multiple areas with new customers and applications. In industrial, we had wins in areas such as automation flow, metering and climate control. In medical, we expanded our reach beyond traditional ultrasound, securing several awards for diagnostic and therapeutic applications.

第四季調整後攤薄每股收益為 0.47 美元，較去年同期下降 0.09 美元。全年調整後攤薄每股收益為 2.22 美元，較 2022 年減少 0.24 美元，Ashish 將為我們的財務表現增添更多色彩。儘管 2023 年是充滿挑戰的一年，但我們在執行長期策略方面繼續取得重大進展。我們專注於獲利成長，透過先進材料能力推動多元化，並透過行動電氣化和創新產品市場實現成長，這仍然是我們的首要任務。2023 年，我們在多個領域的非運輸終端市場憑藉新客戶和新應用取得了紮實進展。在工業領域，我們在自動化流量、計量和氣候控制等領域取得了勝利。在醫療領域，我們將業務範圍擴展到傳統超音波之外，在診斷和治療應用方面獲得了多個獎項。

In defense, we had strong traction in secure communications, autonomous unmanned vehicles and advanced undersea imaging in transportation we secured our first E brake and accelerometer awards and won a development contract for motor position sensing. Our MagLev acquisition made strong inroads on multiple opportunities for current sensing applications on the operations front, our plants work to drive improvements to offset the unfavorable impacts from the mix shift, lower revenue and currency rate changes. We made significant progress in the consolidation of our warehouse facility into our Matamoros site in Mexico, and the project is on track to be completed in the first half of 2024 earlier in 2023, our teams completed the consolidation of our two facilities in Denmark in 2024. We look to build on this momentum. Non-transportation sales declined 22% in the fourth quarter compared to the prior year period and declined 12% versus last year, driven primarily by the burn-down of customer inventories across the industrial and distribution markets.

在國防領域，我們在安全通訊、自主無人駕駛車輛和運輸領域先進的海底成像方面擁有強大的吸引力，我們獲得了第一個電子煞車和加速計獎項，並贏得了電機位置感測的開發合約.我們對 MagLev 的收購為營運方面的電流感測應用帶來了多種機會，我們的工廠致力於推動改進，以抵消組合轉變、收入下降和匯率變化的不利影響。我們在將倉庫設施整合到墨西哥馬塔莫羅斯基地方面取得了重大進展，該項目預計將於2024 年上半年完成，並於2023 年早些時候完成，我們的團隊於2024 年完成了丹麥兩個設施的整合。我們希望在此勢頭的基礎上再接再厲。第四季非運輸銷售額年減 22%，與去年同期相比下降 12%，這主要是由於工業和分銷市場的客戶庫存消耗所致。

In the industrial market, sales continued to be soft in the quarter, driven by decreased demand for micro actuators used in industrial printing applications due primarily to softness in China. We also saw softness across other industrial and distribution customers as inventory levels continue to correct. We were successful with several sales wins in the quarter, including in industrial printing, EMC components and temperature sensing with two existing customers. We added three new customers in the quarter, including one for temperature sensing for a heat pump application, one for a subsea PAs or sensing application, and another for condition monitoring in medical markets where sales remained more stable. We are seeing steady demand and expect further growth in 2024. We had multiple wins in the quarter for diagnostic ultrasound as well as with the therapeutics customer, we added one new customer in the quarter for therapeutic ultrasound. We expect the long-term prospects for the aerospace and defense end market to be solid, given our enhanced capabilities and material formulations. Aerospace and defense sales are expected to grow in 2024. We received multiple orders in the quarter for phones as to new programs for sonobuoys and had awards with multiple customers for temperature sensing as well as awards for aerospace beacons and an RF filter application. We added one new customer for an application and current sensing looking ahead to 2024 in non-transportation end markets, we expect continued softness in the industrial and distribution end market for the first half of the year with the potential to improve in the second half of 2024.

在工業市場，本季銷售持續疲軟，原因是工業列印應用中使用的微型執行器的需求下降，這主要是由於中國市場疲軟所致。隨著庫存水準繼續調整，我們也看到其他工業和分銷客戶的疲軟。我們在本季度取得了多項銷售業績，包括工業印刷、EMC 組件和溫度感測領域的兩個現有客戶，並取得了成功。我們在本季度增加了三個新客戶，其中一個用於熱泵應用的溫度感測，一個用於海底 PA 或感測應用，另一個用於醫療市場的狀態監測，該市場的銷售仍然更加穩定。我們看到需求穩定，預計 2024 年將進一步成長。我們在本季度在診斷超音波以及治療客戶方面取得了許多勝利，我們在本季度增加了一個治療超音波新客戶。鑑於我們增強的能力和材料配方，我們預計航空航太和國防終端市場的長期前景將是穩固的。航空航太和國防銷售預計 2024 年將成長。本季我們收到了多份涉及聲納浮標新專案的手機訂單，並獲得了多個客戶的溫度感測獎項以及航空航標和射頻濾波器應用獎項。展望 2024 年，我們在非運輸終端市場增加了一位應用和電流感測新客戶，我們預計今年上半年工業和分銷終端市場將持續疲軟，下半年可能會有所改善2024 年。

For defense and medical markets, we anticipate a stable environment with solid progress on the qualification of products for prospective new customers, long term, we expect our material formulations and in-house know-how to continue to support our growth in key high quality non-transportation end markets, in line with our diversification strategy. Additionally, we anticipate the mega trends of automation, connectivity and efficiency as well as growth in minimally invasive medical procedures will provide us momentum as we continue expansion in these markets.

對於國防和醫療市場，我們預計將有一個穩定的環境，在為潛在新客戶提供產品的資格方面取得紮實進展，從長遠來看，我們預計我們的材料配方和內部專業知識將繼續支持我們在關鍵高品質非-交通終端市場，符合我們的多元化策略。此外，我們預計自動化、連接性和效率的大趨勢以及微創醫療程序的成長將為我們在這些市場的持續擴張提供動力。

Transportation sales were $69 million in the fourth quarter, down approximately 3% from the same period last year. For the full year, Transportation sales were $301 million, down 1% from last year, primarily due to the softening of sales of commercial vehicle products in the fourth quarter. We expect the softer demand environment for commercial vehicle products in 2024 on the light-vehicle front sales are expected to be flat, and we continue to track market share dynamics in China, given the competition between local and transplant OEMs, growth rates for ICE versus EV and hybrid moving into 2024 are less of a concern for us, given our products are agnostic to the drivetrain technology. In the fourth quarter, we had solid wins across various product groups of note is a large award for accelerometer sensors with a North American OEM, a follow-up award to the first win we had in this space earlier in 2023, we had wins across all product platforms, including accelerator modules, ride height sensing and passive safety sensors. We added new customers in China, Canada and Europe for current sensing, total booked business was approximately $1.4 billion at the end of the quarter. In 2023, we had a strong year of awards for electrified platforms and continue to make progress on our goal of having more than 25% of our light vehicle revenue come from electrified platforms by 2025, we gained momentum on securing electric vehicle business in the quarter as we added three new customers. Our electrification wins were primarily driven by accelerometer and current sensors, where we continue to gain momentum in the market, benefiting from our strong pipeline of new opportunities from our Magnet acquisition.

第四季運輸銷售額為 6,900 萬美元，比去年同期下降約 3%。全年交通運輸銷售額為3.01億美元，較去年下降1%，主要是因為第四季商用車產品銷售疲軟。我們預計 2024 年商用車產品的需求環境將趨於疲軟，輕型車前端銷售預計將持平，考慮到本土和移植 OEM 之間的競爭、ICE 與鑑於我們的產品與傳動系統技術無關，進入2024 年的電動車和混合動力車對我們來說不太在意。在第四季度，我們在各個產品組中取得了穩固的勝利，值得注意的是，與北美OEM 合作的加速度計感測器獲得了一項大獎，這是我們2023 年早些時候在該領域獲得的第一個勝利的後續獎項，我們在各個產品組中都取得了勝利所有產品平台，包括加速器模組、行駛高度感測和被動安全感測器。我們在中國、加拿大和歐洲增加了電流感測的新客戶，截至本季末總預訂業務約為 14 億美元。2023年，我們在電動化平台上獲得了強勁的獎項，並在實現到2025年超過25%的輕型汽車收入來自電動化平台的目標方面繼續取得進展，本季度我們在確保電動車業務方面獲得了動力因為我們增加了三個新客戶。我們在電氣化方面的勝利主要是由加速度計和電流感測器推動的，由於我們收購 Magnet 的強大新機會，我們在這兩個領域繼續獲得動力。

As we look to our future, we are excited by the opportunity the transition to electrification offers us even as penetration rates adjust near term, we continue to see the foot well in the vehicle as a space where we expect to expand our product offering with traditional accelerator modules, haptic modules, New Breed E brake product offering, weight and cost advantages and the future introduction of our DR pad technology, a low travel Accelerator product. We expect these and other sensor applications will increase our ability to grow content with a potential SAM of greater than $1 billion.

當我們展望未來時，我們對向電氣化過渡為我們提供的機會感到興奮，儘管滲透率短期內會有所調整，但我們仍然將汽車中的腳部視為一個空間，我們希望透過傳統技術來擴展我們的產品供應。加速器模組、觸覺模組、New Breed E 煞車產品、重量和成本優勢以及未來推出的 DR 墊技術（一種低行程加速器產品）。我們預計這些和其他感測器應用將提高我們成長內容的能力，其潛在 SAM 超過 10 億美元。

Turning to our outlook for 2024, the North American light vehicle market is expected to be in the $15.5 million to $16 million unit range. European production is forecasted in the 17 million unit range. China volumes are expected in the 28 million unit range. Overall, we anticipate a flat market for light vehicle production. We expect softness in commercial vehicle related revenue throughout 2024 due to lower end market demand as well as competitive pressures for the non-transportation markets. In line with our diversification strategy, we aim to expand the customer base and range of applications in the industrial, medical and defense end markets. Inventory levels continue to normalize at industrial customers and in distribution, while we are seeing some green shoots, it's too early to say this is a robust trend. We expect a soft first half with the possibility of strength in the second half of the year. Demand in defense and medical markets is expected to remain soft.

展望 2024 年，北美輕型車市場預計將在 1,550 萬至 1,600 萬美元的範圍內。歐洲產量預計在 1700 萬輛左右。中國銷售量預計在 2800 萬台左右。總體而言，我們預計輕型汽車生產市場將持平。由於終端市場需求較低以及非交通市場的競爭壓力，我們預期 2024 年商用車相關收入將疲軟。根據我們的多元化策略，我們的目標是擴大工業、醫療和國防終端市場的客戶群和應用範圍。工業客戶和分銷領域的庫存水準繼續正常化，雖然我們看到了一些萌芽，但現在說這是一個強勁的趨勢還為時過早。我們預計上半年會表現疲軟，但下半年可能會走強。國防和醫療市場的需求預計將保持疲軟。

In terms of guidance for full year 2024, we anticipate sales in the range of $530 million to $570 million and adjusted diluted earnings per share in the range of $2.10 to $2.35.

就 2024 年全年指引而言，我們預計銷售額將在 5.3 億美元至 5.7 億美元之間，調整後的稀釋每股收益將在 2.10 美元至 2.35 美元之間。

And now I'll turn it over to Ashish, who will walk us through the financial results in more detail.

現在我將把它交給 Ashish，他將向我們介紹更詳細的財務表現。

Ashish?

阿什什？

Thank you.

謝謝。

Can see fourth quarter sales were $125 million, down 12% compared to the fourth quarter of 2022 and down 7% sequentially from the third quarter of 2023. Sales to transportation customers were down 3% for the fourth quarter of last year from the fourth quarter of last year due to the softness in sales related to commercial vehicle products. Sales to non-transportation end markets decreased 22% year over year, driven by continued softness in the industrial and distribution end markets. Sales to the medical as well as aerospace and defense end markets remained strong with continued growth momentum going into 2024. Our adjusted gross margin was 34.2% in the fourth quarter, down 215 basis points compared to the fourth quarter of 2022 and down 29 basis points compared to the third quarter of 2023. The decline was primarily driven by the unfavorable impact of lower revenue, the change in market mix and approximately $900,000 from currency changes.

可以看到，第四季銷售額為 1.25 億美元，比 2022 年第四季下降 12%，比 2023 年第三季連續下降 7%。由於商用車產品相關銷售疲軟，去年第四季對運輸客戶的銷售額較去年第四季下降了3%。由於工業和分銷終端市場持續疲軟，非運輸終端市場的銷售額較去年同期下降 22%。醫療、航空航太和國防終端市場的銷售仍然強勁，成長動能將持續到 2024 年。第四季調整後毛利率為34.2%，較2022年第四季下降215個基點，較2023年第三季下降29個基點。下降的主要原因是收入下降、市場結構變化以及匯率變化造成的約 90 萬美元的不利影響。

As Kieran highlighted, we made good progress on our project to transition production from our warehouse location to our site in Matamoros. We expect completion of the transition in the first half of 2024 as we navigate the challenging revenue environment, we reduced operating expenses in the fourth quarter through temporary cost reduction measures and released reserves related to incentive compensation. We do not expect to have the impact of these items in the first quarter of 2024. As a result and due to an increase in R&D spend, we expect our operating expenses in the first quarter of 2024 to be higher by slightly more than 3% of revenue compared to the fourth quarter. Our objective is to ensure we continue to invest in programs that will drive future revenue growth for our Company earnings per diluted share were $0.49 in the fourth quarter. Adjusted earnings for the fourth quarter were $0.47 per diluted share compared to $0.56 per diluted share at the same time last year. For the full year, revenue was $550 million, a decrease of 6% compared to 2022. Sales to the transportation end market were down 1% due to the softening of sales of commercial vehicle products. Sales to the other end markets declined 12% in 2023. We had good momentum in the medical as well as aerospace and defense end markets. As we had previously discussed, we saw softness in the industrial and distribution markets, which we expect will last into the first half of 2024 with a potential recovery in the second half. Foreign exchange rates impacted sales unfavorably by approximately $2.5 million in 2023 our adjusted gross margin was 34.8% in 2023 compared to 36.5% in 2022. The primary drivers of the reduced gross margin were the unfavorable impact of lower revenue and market mix. Foreign currency rates also impacted us unfavorably by approximately $6 million. Supply chain is in better shape than the last couple of years, although we still face pressure on certain material costs as well as labor, the impact of the recent events in the Red Sea has been minimal so far as Kieran highlighted, we expect pricing pressure from our customer base, primarily in transportation. Our global teams will continue to focus on operational and supply chain improvements with the goal to maintaining and enhancing profitability. For the full year of 2023, our earnings were $1.92 per diluted share. Adjusted earnings for the full year 2023 were $2.22 per diluted share compared to $2.46 per diluted share for 2022, we achieved a 21.9% adjusted EBITDA margin in 2023, despite the drop in sales and the unfavorable impact of end-market mix.

正如 Kieran 所強調的那樣，我們在將生產從倉庫地點轉移到馬塔莫羅斯工廠的項目上取得了良好進展。我們預計在 2024 年上半年完成過渡，因為我們應對充滿挑戰的收入環境，我們在第四季度透過臨時成本削減措施減少了營運費用，並釋放了與激勵薪酬相關的準備金。我們預計這些項目不會在 2024 年第一季產生影響。因此，由於研發支出增加，我們預計 2024 年第一季的營運支出將比第四季略高於營收的 3%。我們的目標是確保我們繼續投資於能夠推動未來營收成長的計劃，因為我們公司第四季攤薄後每股收益為 0.49 美元。第四季調整後每股攤薄收益為 0.47 美元，去年同期為每股攤薄收益 0.56 美元。全年營收為 5.5 億美元，較 2022 年下降 6%。由於商用車產品銷售疲軟，運輸終端市場銷售下降1%。2023 年，其他終端市場的銷售額下降了 12%。我們在醫療、航空航太和國防終端市場中勢頭良好。正如我們之前討論的，我們看到工業和分銷市場的疲軟，我們預計這種情況將持續到 2024 年上半年，並可能在下半年復甦。匯率對 2023 年銷售額產生了約 250 萬美元的不利影響，2023 年調整後毛利率為 34.8%，而 2022 年為 36.5%。毛利率下降的主要原因是收入和市場結構下降的不利影響。外幣匯率也為我們帶來了約 600 萬美元的不利影響。供應鏈的狀況比過去幾年更好，儘管我們仍然面臨某些材料成本和勞動力的壓力，但據 Kieran 強調，最近紅海事件的影響微乎其微，我們預計價格壓力來自我們的客戶群，主要是運輸領域。我們的全球團隊將繼續專注於營運和供應鏈的改進，以維持和提高獲利能力。2023 年全年，我們攤薄後每股收益為 1.92 美元。2023 年全年調整後每股攤薄收益為2.22 美元，而2022 年攤薄後每股收益為2.46 美元。儘管銷售額下降以及終端市場組合的不利影響，我們在2023 年實現了21.9% 的調整後EBITDA利潤率。

Moving to cash generation and the balance sheet, we generated $32 million in operating cash flow for the fourth quarter of 2023 and $89 million for the full year, down from $121 million in 2020 to the 2022 operating cash flow included $27 million in onetime inflow from the termination of the US pension plan. Our balance sheet remains strong with a cash balance of $164 million as of December 31st, 2023, up from $157 million at the end of 2022. Our long-term debt balance was $68 million at the end of 2023, down from $84 million in December 2022. During the quarter, we repurchased approximately 386,000 shares of CTS stock totaling approximately $16 million. And for the full year, we repurchased 970,000 shares, totaling approximately $41 million in total in 2023 we returned over $46 million to shareholders through dividends and share buybacks. As Kevin mentioned, our Board recently approved a new $100 million share repurchase program. We remain focused on strong cash generation and are committed to maintaining a healthy balance sheet to continue to support organic growth, strategic acquisitions and returning cash to shareholders.

轉向現金產生和資產負債表，我們在2023 年第四季產生了3,200 萬美元的營運現金流，全年產生了8,900 萬美元的營運現金流，低於2020 年的1.21 億美元，而2022 年的營運現金流包括2,700 萬美元的一次性流入。美國退休金計畫的終止。截至 2023 年 12 月 31 日，我們的資產負債表依然強勁，現金餘額為 1.64 億美元，高於 2022 年底的 1.57 億美元。截至 2023 年底，我們的長期債務餘額為 6,800 萬美元，低於 2022 年 12 月的 8,400 萬美元。本季度，我們回購了約 386,000 股 CTS 股票，總價值約 1,600 萬美元。全年，我們回購了 970,000 股股票，總額約為 4,100 萬美元。2023 年，我們透過股息和股票回購向股東返還了超過 4,600 萬美元。正如 Kevin 所提到的，我們的董事會最近批准了一項新的 1 億美元股票回購計畫。我們仍然專注於強勁的現金生成，並致力於維持健康的資產負債表，以繼續支持有機成長、策略性收購並向股東返還現金。

This concludes our prepared comments. We would like to open the line for questions at this time.

我們準備好的評論到此結束。我們現在想開通提問熱線。

Thank you.

謝謝。

If anyone would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star by two. I'm prepared to ask your question, please ensure you are unmuted likely. So let's start that by one on your telephone keypad to register question. Our first question today is from Josh Buchalter from TD. Helen. Josh, please go ahead.

如果有人想提問，請按電話鍵盤上的星號，然後再按一個。如果您想撤回您的問題，請按兩顆星。我準備好問你的問題，請確保你沒有被靜音。因此，讓我們先透過電話鍵盤上的一個來註冊問題。我們今天的第一個問題來自 TD 的 Josh Buchalter。海倫.喬什，請繼續。

Your line is and.

你的線是 和 。

And good morning here this morning, Ashish, this is Sam on for Josh. So third party appointed we're looking at so light vehicle according to third-party estimates for light vehicle builds are flat to this year in line with your expectations and what you've communicated, but I was wondering if you could give us some more details maybe by geography and magnitude for your expectations for commercial builds and how that's trending given that's where the weakness has been historically and today?

今天早上好，阿什什，我是喬希的山姆。因此，第三方指定的我們正在研究如此輕型的車輛，根據第三方估計，輕型車輛的製造與今年持平，符合您的期望和您所傳達的內容，但我想知道您是否可以給我們更多信息您對商業建築的期望可能按地理位置和規模詳細說明，考慮到歷史上和今天的弱點所在，其趨勢如何？

Yes, Emma, on the last earnings call, we talked about at the softer demand in commercial vehicles, and we even gave you some clear guidance on that in the fourth quarter and then it came in pretty much in line with what we saw there. And as I mentioned on the call, we expect a soft demand environment, more competitive pressures in the year ahead. So we're navigating it by quarter, but it looks like it's going to be a softer market for the year.

是的，艾瑪，在上次財報電話會議上，我們談到了商用車需求疲軟，我們甚至在第四季度就此向您提供了一些明確的指導，然後它與我們在那裡看到的情況非常一致。正如我在電話會議上提到的，我們預計未來一年需求環境將疲軟，競爭壓力將更大。因此，我們將按季度進行調整，但看起來今年的市場將更加疲軟。

Understood and then moving to the industrial segment, what I believe you have most of your channel exposure where inventory is sitting today versus last June when you started to see industrial correct. And where are you guys trying to get at where you would feel comfortable with that now selling back into the channel more?

了解然後轉向工業領域，我相信您的大部分渠道暴露在今天的庫存中，而不是去年六月，當時您開始看到工業正確。你們在哪裡試圖達到讓你們對現在更多地回銷到頻道感到滿意的程度？

So Sam, we have been seeing inventories correct at the distributors. We don't have full line of sight into some of their customers like EMS, where we believe there's a build in inventory buildup as well. But we've seen it correcting and each quarter. And even if you look at the reports from other companies, some companies have said out there publicly that burn down of inventory is probably burned through somewhere between 60%, 70% plus so far. So with the guide we're given, we're expecting softness in the first two quarters of this year.

薩姆，我們一直看到經銷商的庫存是正確的。我們沒有全面了解他們的一些客戶，例如 EMS，我們認為這些客戶的庫存也有所增加。但我們每季都看到它在修正。即使你看其他公司的報告，一些公司公開表示，到目前為止，庫存消耗率可能在 60% 到 70% 以上之間。因此，根據我們提供的指南，我們預計今年前兩個季度將出現疲軟。

Understood. And one last one for me. And I'll get back in the queue. I'm glad to see the $100 million buyback authorization from the Board. I'm assuming that you guys are going to be opportunistic with those given there's no scheduled left for the program. But if you could, would you mind giving a sense for the cadence of deployment at 2024? If you have anything come down for that.

明白了。最後一張是給我的。我會回到隊列中。我很高興看到董事會授權回購 1 億美元。我假設你們會對那些因為該計劃沒有剩餘安排的人採取機會主義態度。但如果可以的話，您介意介紹一下 2024 年的部署節奏嗎？如果你有什麼事就下來吧。

So we generally have been historically opportunistic. If you look at 2023 and we have had a regular cadence of buybacks. And depending on the share price it was heavier in the fourth quarter. So that's an approach that we would expect to continue taking as we move forward.

因此，我們在歷史上通常都是機會主義的。如果你看看 2023 年，我們就會定期回購。根據股價，第四季的情況更為嚴重。因此，我們希望在前進過程中繼續採用這種方法。

And then, you know, our primary objective is still to continue evaluating strategic M&A opportunities. So we will balance capital allocation from that perspective. If something is on the horizon, then we'll obviously look to do things differently from a buyback perspective.

然後，你知道，我們的首要目標仍然是繼續評估策略併購機會。所以我們會從這個角度來平衡資本配置。如果即將發生某些事情，那麼我們顯然會從回購的角度採取不同的做法。

Understood.

明白了。

Thank you.

謝謝。

Thank you.

謝謝。

Our next question is from Justin Long from Stephens. Justin, please go ahead.

我們的下一個問題來自史蒂芬斯的賈斯汀朗。賈斯汀，請繼續。

Your line is open.

您的線路已開通。

Thanks and good morning.

謝謝，早安。

So I wanted to start just with. (multiple speakers)

所以我想從開始。（多個發言者）

Good morning. Kieran, I think you made a comment about the first quarter radio revenue being soft similar to the fourth quarter. So I just wanted to clarify, are you assuming that revenue in 1Q looks similar to the fourth quarter. And if so, the full year guidance would imply that we see a pretty big sequential step-up in revenue after the first quarter. So is that just a function of what you've mentioned on the industrial markets hopefully picking up? Or is there anything else that you would point to that could drive that sequential acceleration through the year.

早安.基蘭，我認為您對第一季度廣播收入與第四季度類似的疲軟發表了評論。所以我只是想澄清一下，您是否認為第一季的收入看起來與第四季度相似。如果是這樣，全年指引將意味著我們看到第一季後營收將出現相當大的連續成長。那麼，這只是您提到的工業市場有望回升的結果嗎？或者您是否會指出其他任何事情可以推動這一年的連續加速。

So just and the expected start of your question.

這就是你問題的預期開始。

Yes, we said we're expecting a softer quarter in the first quarter of this year, similar to the last quarter, and Ashish also talked about the increase in OpEx that we're going to see as well.

是的，我們說過，我們預計今年第一季將出現疲軟的情況，與上一季類似，Ashish 也談到了我們也將看到的營運支出的成長。

And then to your second question, yes, we would expect an increasing trend and a little heavier on the back half of the year.

關於你的第二個問題，是的，我們預計今年下半年會出現成長趨勢，而且會有所加重。

(multiple speakers) Okay. And that's natural pickup in industrial.

（多個發言者）好的。這是工業領域的自然成長。

Yes, industrial is a part of that pickup. And we also see continued growth momentum in medical and aerospace and defense end markets. And as Kevin mentioned, commercial vehicle is another area that we are expecting some softness in 2024 and light vehicle seems to be stable right now.

是的，工業是皮卡的一部分。我們也看到醫療、航空航太和國防終端市場的持續成長動能。正如 Kevin 所提到的，商用車是我們預計 2024 年會出現疲軟的另一個領域，而輕型車目前似乎很穩定。

Okay. And just to circle back on the operating of the expense commentary you had, Ashish, I just wanted to clarify, were you saying that operating expenses would be up roughly 3% sequentially in the first quarter?

好的。回顧一下您對費用營運的評論，Ashish，我只是想澄清一下，您是說第一季的營運費用將環比增長約 3% 嗎？

Yes, that's what I was implying. We had some temporary cost reduction measures that reduced our operating costs in the fourth quarter and we also released some incentive comp-related expenses. I'm sorry, there's those. So we won't have the benefit of that.

是的，這就是我所暗示的。我們採取了一些臨時成本削減措施，降低了第四季度的營運成本，我們也釋放了一些與獎勵相關的費用。抱歉，有這些。所以我們不會從中受益。

And then I also highlighted the R&D costs will be higher in 2024 as we continue funding our growth programs. And you've seen us talk about some interesting wins, both in electrification as well as in the non-transportation market which we are really excited about.

然後我還強調，隨著我們繼續為成長計畫提供資金，2024 年的研發成本將會更高。您已經看到我們談論了一些有趣的勝利，無論是在電氣化方面還是在非交通市場方面，我們對此感到非常興奮。

Okay, great. And last one for me. I guess going back to the buyback announcement, this authorization for $100 million is a lot higher than the authorization roughly a year ago for $50 million. What should we read into that? Is it fair to say that the acquisition pipeline has maybe become a little bit more challenging just based on the availability of deals, valuations, et cetera? Or is that the wrong read? Maybe you could just provide an update on what you're seeing on that front?

好的，太好了。最後一張給我。我想回到回購公告，這次 1 億美元的授權比大約一年前的 5,000 萬美元授權要高得多。我們該解讀什麼？可以公平地說，僅根據交易的可用性、估值等，收購管道可能變得更具挑戰性嗎？還是讀錯了？也許您可以提供您在這方面所看到的最新情況？

Yes, and just on your board, and we feel we've got good cash flow generation, a strong balance sheet. And as she's already touched on, we're not backing off on strategic acquisitions that's something that's very important for us as we go forward as well. And we feel like we've got the balance sheet to do both.

是的，就在你們的董事會，我們覺得我們有良好的現金流產生和強大的資產負債表。正如她已經提到的，我們不會放棄策略性收購，這對我們的前進也非常重要。我們覺得我們的資產負債表可以做到這兩點。

Okay, understood. Thank you for the time.

好的，明白了。謝謝你的時間。

Thanks, Justin.

謝謝，賈斯汀。

Thank you.

謝謝。

Thank you. Our next question is from John Franzreb from Sidoti & Company. John, please go ahead your line.

謝謝。我們的下一個問題來自 Sidoti & Company 的 John Franzreb。約翰，請繼續你的路線。

And good morning, guys, and thanks for taking the questions on management.

早上好，夥計們，感謝您提出有關管理的問題。

I'd like to go back to the pricing pressure that you mentioned, is that limited to the commercial vehicle market was extend into the light vehicle market?

我想回到您提到的價格壓力，是否僅限於商用車市場延伸到輕型車市場？

John, I think we see it across all transportation markets, so commercial and light vehicle. And we think there's been nothing going on with the OEMs. They're just going to be pressure on the supply base and but that's something we're prepared for in terms of managing our own cost and supply base as well.

約翰，我認為我們在所有運輸市場上都看到了這一點，包括商用車和輕型車輛。我們認為原始設備製造商沒有發生任何事情。它們只會對供應基地造成壓力，但我們在管理自己的成本和供應基地方面也做好了準備。

So the contracts you have with the light vehicle market, they're not fixed price for the duration of the platform, the adjusted somehow?

那麼，您與輕型汽車市場簽訂的合約在平台期限內不是固定價格，是否經過了某種調整？

No, John, there, they're fixed price, but it's a competitive environment out there is it has this is nothing new for us in the transportation. What I'd say to you is when it comes to getting new business awards, sometimes you get negotiated on existing business. So you've got to make sure you're balancing and protecting your portfolio profitability overall?

不，約翰，他們是固定價格，但這是一個競爭激烈的環境，這對我們的運輸業來說並不是什麼新鮮事。我要對你說的是，當談到獲得新業務獎項時，有時你會就現有業務進行談判。因此，您必須確保平衡並保護您的投資組合的整體獲利能力？

And John, in the transportation contracts, there's generally a price reduction built in on an annual basis. And if you look at the last couple of years, we have seen an opposite trend where we have been able to get price increases. So that dynamic was very different in the last couple of years due to the supply chain challenges and cost pressures on the materials side on the labor side. So and that's improved quite a bit. And the OEMs are feeling pressure from many other fronts like Ken highlighted. So we believe that that will drive increase focus on those contractual price obligations that we have in those contracts.

約翰，在運輸合約中，通常每年都會降價。如果你看看過去幾年，我們看到了相反的趨勢，我們能夠實現價格上漲。因此，由於供應鏈挑戰和勞動力方面材料的成本壓力，過去幾年的動態非常不同。所以這已經改善很多了。正如 Ken 所強調的，原始設備製造商正感受到來自許多其他方面的壓力。因此，我們相信，這將促使人們更加關注我們在這些合約中承擔的合約價格義務。

And John, just to add to that, in terms of just profitability. We will not lose our focus as we haven't in the past in terms of driving operational efficiency, material costs to compensate for that.

約翰補充說，就盈利能力而言。我們不會像過去那樣失去對提高營運效率和材料成本的關注，以彌補這一點。

A little bit of return to normal, I would say on that side of the market.

我想說的是，從市場的角度來看，有一點回歸正常。

Perfect.

完美的。

Fair enough. I mean, certainly there's an affordability issue out there with the light vehicle market has to be rectified from as far as on driving improved profitability as far as your restructuring actions that you said will be completed in the first half of the year, where do we stand and kind of incremental on operating improvements we should be thinking about as those moves become completed?

很公平。我的意思是，輕型汽車市場肯定存在負擔能力問題，從提高盈利能力到您所說的將在今年上半年完成的重組行動，我們應該在哪裡進行糾正？當這些舉措完成後，我們應該考慮如何逐步改進營運？

Yes. So John, in the past, we've talked about it's a move within two sites in Mexico. So we are not expecting a huge amount of improvement and there will be some improvements that that will benefit from the primary reason for us to do this move is to improve our capabilities on the delivery front on the quality front with our customer base and make sure we can be a good partner as we move forward. And the move is pretty much on schedule on the production there in what is was completed at the end of last year and we are in the process of gradually ramping up production in the first half of 2024.

是的。約翰，過去我們討論過這是墨西哥兩個地點的搬遷。因此，我們預計不會有巨大的改進，並且將會有一些改進，這些改進將受益於我們採取這一舉措的主要原因是與我們的客戶群一起提高我們在質量方面的交付能力，並確保在在我們前進的過程中，我們可以成為一個很好的合作夥伴。去年年底，該工廠的生產已基本按計劃完成，我們正在於 2024 年上半年逐步提高產量。

Okay.

好的。

And you have been highlighting over the past year that the transition from ICE to EV was a net positive. So the content was something I believe at two times on EV versus ICE, it seems like you backed off that a bit. I know 95% of content is transferable and what is there a difference between hybrid EV and ICE. Can you kind of walk us through what you're thinking now versus, say, six months ago?

在過去的一年裡，您一直強調從內燃機到電動車的轉變是一個淨積極的結果。所以內容是我在電動車和內燃機車上兩次相信的內容，看來你有點退縮了。我知道 95% 的內容是可轉移的，混合動力電動車和內燃機汽車之間有什麼區別。您能否向我們介紹一下您現在的想法與六個月前的情況相比？

Yes, John, we haven't backed off at all. Actually if you go back to my earlier remarks, we said we're well on track for the 25% of electrified revenues coming from light vehicle platforms by 2025. So we feel good about that.

是的，約翰，我們根本沒有退縮。事實上，如果你回到我之前的言論，我們說過，到 2025 年，我們有望實現 25% 的電氣化收入來自輕型汽車平台。所以我們對此感覺良好。

And then the other thing we've highlighted in the transcript today as well is and the progress we're making on the electrified platforms with a break with motor position sensing, especially now with current sensing, where we've had multiple wins. And we've got a really strong pipeline, which goes across the hybrid and the platforms as well. So we feel very good about that and increasing content going forward.

然後，我們今天在文字記錄中強調的另一件事是，我們在電氣化平台上取得的進展，在馬達位置感測方面取得了突破，特別是現在在電流感測方面，我們已經取得了多項勝利。我們有一個非常強大的管道，它也跨越混合和平台。因此，我們對此感到非常滿意，並會繼續增加內容。

We said it's worth assigned to us of about {$1 billion}.

我們說它值得分配給我們大約{10億美元}。

Yet, John, the other thing Kevin highlighted is that the adoption rate of EVs can be a little bit different than what the market was expecting in the short term. We still feel good about the long term and the slower transition in the short term doesn't have a material impact on us because of our portfolio. It's mostly transitions between ICE and EVs.

然而，約翰，凱文強調的另一件事是，電動車的採用率可能與市場短期預期略有不同。我們對長期發展仍然感覺良好，短期內較慢的轉型不會因為我們的投資組合而對我們產生重大影響。主要是內燃機和電動車之間的過渡。

Okay.

好的。

And just one last question, and it's references back to an earlier question, second half of the year, that revenue number to hit your midpoint, what sectors have to come back to strongest of outperform compared to what they did in the first half.

最後一個問題，它引用了先前的問題，即今年下半年的收入數字要達到中點，與上半年相比，哪些產業必須恢復到最強的表現。

We would expect and the industrial and the distribution markets to rebound in the second half.

我們預計工業和分銷市場將在下半年反彈。

John, to get there.

約翰，去那裡。

Okay.

好的。

Thanks for the clarity and appreciate taking my questions.

感謝您的澄清並感謝回答我的問題。

Thank you, John.

謝謝你，約翰。

Frankie.

法蘭基.

Before we take our next question, I'd just like to remind everyone, it's star one to register a question. Our next question is from Hendi Susanto from Gabelli Funds, and please go ahead. Your line is open.

在我們提出下一個問題之前，我想提醒大家，註冊問題是首要任務。我們的下一個問題來自 Gabelli Funds 的 Hendi Susanto，請繼續。您的線路已開通。

Good morning, Ciaran And Ashish.

早上好，塞蘭和阿什什。

Hey, Andy.

嘿，安迪。

Yes.

是的。

So Kevin, I think you highlighted the three areas of softness, distribution, industrial end market and then the commercial vehicle market. And can you share with us whether you have seen the bottom of those? And I'm wondering whether some parts may still be seeing decline for well, let's say, for the next six months, just in Q1 and Hendi, I heard the commercial big of what was the first part of that question, what was the other market you mentioned up with it up in each of those three areas that are weak.

凱文，我認為您強調了軟性、分銷、工業終端市場和商用車市場這三個領域。您能否與我們分享您是否已經看到了這些底部？我想知道某些部分是否仍然會出現長期下降，比方說，在接下來的六個月裡，就在第一季和Hendi，我聽到了這個問題的第一部分是什麼，另一個部分是什麼的商業大事您提到的市場在這三個薄弱領域中的每一個領域都有所提升。

Okay.

好的。

Have you like have you have we seen the bottom or whether we may see the bottom.

你喜歡我們是否已經看到底部或我們是否可以看到底部。

Okay,

好的，

Later in Q. one or and then the second one is whether there are still some weakness is such that we are still seeing decline up perhaps from Q4 to Q1 and Q1, Q2.

稍後在第一季或第二季度，是否仍然存在一些弱點，以至於我們仍然看到從第四季度到第一季以及第一季、第二季的下降。

And it feels like on the industrial and the distribution side, we're it feels like we're scraping along the bottom and that we should start to see improvement whether that's in Q1 or Q2, I can't tell you at this stage, but the inventory levels will burn down. Commercial Vehicle feels like it's still in a downward trend as we said that there'd be and from our perspective is softer demand and more competitive environment going forward.

感覺在工業和分銷方面，我們感覺我們正在底部掙扎，無論是在第一季度還是第二季度，我們都應該開始看到改善，我現階段無法告訴你，但庫存水平將會下降。商用車感覺仍處於下降趨勢，正如我們所說，從我們的角度來看，未來需求將更加疲軟，競爭環境將更加激烈。

And then a question for us is, as you mentioned, a pricing pressure based on at Telik annual contractual price obligation and any insight into the timing, whether it would start on January first, whether and some would start later when it comes to the general price obligation, Andrew?

然後，正如您所提到的，我們面臨的一個問題是，定價壓力是基於 Telik 年度合約價格義務以及對時間的任何了解，是否會在一月份開始，是否以及有些會在一般情況下稍後開始價格義務，安德魯？

And Hendi, it depends on discussions with the customers. Contractually. It starts at the beginning of the year or depending on whatever the contract language says. But there's generally a dialogue between the customer's purchasing team and our sales team and it all boils down to negotiations. And as Kieran highlighted, it revolves around new business awards and a bunch of other considerations. So there's really no perfect clarity for us to say this is when it'll start kicking off, it can be scattered through the year based on the timing of the contracts.

而Hendi，這取決於與客戶的討論。按合約規定。它從年初開始，或取決於合約語言的規定。但客戶的採購團隊和我們的銷售團隊之間通常會進行對話，這一切都歸結於談判。正如基蘭所強調的那樣，它圍繞著新的商業獎項和一系列其他考慮因素。因此，我們確實沒有完全明確地說這是什麼時候開始啟動，它可以根據合約的時間分散在一年中。

Yes.

是的。

Thank you, Kieran.

謝謝你，基蘭。

Thank you, Ashish.

謝謝你，阿什什。

You're welcome.

不客氣。

Thanks, Andy.

謝謝，安迪。

Thank you.

謝謝。

We have a follow-up from John. John. Please go ahead. Your line is open.

我們有約翰的後續行動。約翰。請繼續。您的線路已開通。

And yes, I might have missed this, but did you say what the target R&D spend is going to be for 2024?

是的，我可能錯過了這一點，但您是否說過 2024 年的目標研發支出是多少？

We didn't talk about specific dollars, John. We highlighted that there is an increase in the spend. And if you look at our investor presentation, we do have a range of 5% to 6% of sales, and we have BILL slightly under that number.

我們沒有談論具體的美元，約翰。我們強調支出增加。如果你看一下我們的投資者介紹，我們的銷售額確實在 5% 到 6% 之間，而我們的 BILL 略低於這個數字。

Okay, guys.

好吧，夥計們。

Thank you.

謝謝。

Sure.

當然。

Thank you.

謝謝。

We have no further questions, so I'd like to hand back to Ciaran for any closing the remark.

我們沒有其他問題了，所以我想將結束語交還給 Ciaran。

Thanks, Dave, and thank you all for your time, despite the near-term headwinds, CTS's well positioned for future growth, driven by the megatrends of increased automation, connectivity, energy efficiency and minimally invasive medical innovation. Overall, we are focused on our long-term goals to drive profitable growth. The solid wins in the quarter, expansion of customers and pipeline of opportunities underscore our strong confidence in our future.

謝謝戴夫，感謝大家抽出寶貴的時間，儘管近期存在不利因素，但在自動化、連接性、能源效率和微創醫療創新等大趨勢的推動下，CTS 已為未來的成長做好了充分準備。整體而言，我們專注於推動獲利成長的長期目標。本季的穩固勝利、客戶的擴大和機會的管道凸顯了我們對未來的堅定信心。

I want to thank our global teams for their support in driving our strategic initiatives, successfully launching several new products and continuing to give back to those less fortunate in our communities. We also continue to work hard to enhance our operational performance. Thank you all for joining us today.

我要感謝我們的全球團隊在推動我們的策略性舉措、成功推出多種新產品以及繼續回饋社區中那些不幸的人方面提供的支持。我們也繼續努力提高我們的營運績效。感謝大家今天加入我們。

This concludes our call.

我們的通話到此結束。

Thank you, everyone, for joining today's call. You may now your line and have a lovely day.

謝謝大家參加今天的電話會議。現在您可以排隊並度過愉快的一天了。