CTS Corp (CTS) 2024 Q2 法說會逐字稿

Good morning or good afternoon. Welcome to the CTS Corporation second quarter 2024 conference call. My name is Adam, and I'll be your operator today. (Operator Instructions) I'll now hand the floor to CEO, Kieran O'Sullivan, to begin. So, Kieran. please go ahead when you're ready.

早安或下午好。歡迎參加 CTS Corporation 2024 年第二季電話會議。我叫 Adam，今天我將成為您的接線生。（操作員指示）我現在請執行長基蘭·奧沙利文 (Kieran O'Sullivan) 開始發言。那麼，基蘭。準備好後請繼續。

Thanks, Adam. Good morning and thank you for joining our second quarter 2024 earnings call. We achieved earnings in line with our expectations despite softness in the transportation end market. CTS is focused on future growth through continued diversification of our customer base and end markets. Yesterday, we completed the acquisition of SyQwest, LLC, a leading designer and manufacturer of sonar and underwater acoustic sensing and electronic solutions, primarily for the US naval defense market.

謝謝，亞當。早安，感謝您參加我們的 2024 年第二季財報電話會議。儘管運輸終端市場疲軟，我們的獲利仍符合我們的預期。CTS 致力於透過客戶群和終端市場的持續多元化來實現未來成長。昨天，我們完成了對 SyQwest, LLC 的收購，該公司是聲納和水聲感測及電子解決方案的領先設計商和製造商，主要面向美國海軍國防市場。

SyQwest products enable the sonar systems that guide and protect our submarines and surface ships. We extend a warm welcome to Bob Tarini and the SyQwest team and look forward to leveraging our combined capabilities to drive growth in defense. The acquisition is expected to be accretive in 2025.

SyQwest 產品使聲納系統能夠引導和保護我們的潛艇和水面艦艇。我們熱烈歡迎 Bob Tarini 和 SyQwest 團隊，並期待利用我們的綜合能力來推動國防領域的成長。此次收購預計將在 2025 年實現增值。

Ashish will take us through the Safe Harbor statement. Ashish?

阿什什將帶我們了解安全港聲明。阿什什？

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.

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，更多資訊可以在該公司向 SEC 提交的文件中找到。

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.

如果今天的討論涉及 G 條例下的任何非 GAAP 措施，則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。

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

現在我將把討論轉回我們的執行長基蘭·奧沙利文 (Kieran O'Sullivan)。

Thanks, Ashish. We finished the second quarter with sales of $130 million, a decline of 10% from the second quarter of 2023. For the quarter, non-transportation sales were up 4% and transportation sales were down 22% from the same period last year. Sequentially, non-transportation sales were up 11%. Sales to the transportation end market were down 3% versus the first quarter of 2024. Non-transportation sales were 51% of overall company revenue in the second quarter.

謝謝，阿什什。我們第二季的銷售額為 1.3 億美元，比 2023 年第二季下降 10%。本季非運輸銷售年增 4%，運輸銷售下降 22%。隨後，非交通運輸銷售額增加了 11%。與 2024 年第一季相比，運輸終端市場的銷售額下降了 3%。第二季非運輸銷售額占公司總收入的 51%。

Our book-to-bill ratio was 0.99 in the second quarter, down from 1.07 in the first quarter of 2024. The book-to-bill ratio reflects some positive improvement in the industrial end market with both OEM and distribution customers on a year over year basis and was flat sequentially. Medical bookings were down on a year-over-year basis and up sequentially. Aerospace and defense bookings were up on a year-over-year basis and down sequentially due to the timing of orders.

我們第二季的訂單出貨比為 0.99，低於 2024 年第一季的 1.07。訂單出貨比反映了 OEM 和分銷客戶的工業終端市場的一些積極改善，與去年同期相比，與上一季持平。醫療預約量較去年同期下降，較上季上升。航空航天和國防訂單同比增長，但由於訂單時間的原因而環比下降。

Overall, we continue to monitor the order intake carefully given the challenging global economic environment. While we have seen a sequential improvement in non-transportation sales in the second quarter, the growth rate in the second half of 2024 is expected to be more modest than previously communicated. Second quarter adjusted diluted earnings per share of $0.54 were down 10% year over year and up 14% sequentially. Ashish will add further color on our financial performance later in today's call.

總體而言，鑑於充滿挑戰的全球經濟環境，我們將繼續仔細監控訂單量。雖然我們看到第二季非交通運輸銷售較上季改善，但預計 2024 年下半年的成長率將比先前公佈的更為溫和。第二季調整後攤薄每股收益為 0.54 美元，年減 10%，季增 14%。阿什什將在今天的電話會議上進一步闡述我們的財務表現。

As I mentioned in my opening comments, we acquired SyQwest, a supplier of robust acoustic sensing solutions for naval surface ships, submarines, autonomous underwater vehicles, and torpedoes. The products that SyQwest designs and manufactures include acoustic payloads, transducers, hydrophones, and outboard electronics.

正如我在開場白中提到的，我們收購了 SyQwest，這是一家為海軍水面艦艇、潛艇、自主水下航行器和魚雷提供強大聲學感測解決方案的供應商。SyQwest 設計和製造的產品包括聲學有效載荷、感測器、水聽器和舷外電子設備。

Located in Cranston, Rhode Island, SyQwest bring 60 new team members to CTS. This acquisition strengthens our strategy and scale in the defense end market, further advances our diversification strategy, and brings an addressable market of approximately $500 million. Our acquisition of SyQwest is estimated to add $10 million to $14 million in revenue in the balance of this year. I'm delighted to welcome Bob Tarini and his capable team to CTS.

SyQwest 位於羅德島州克蘭斯頓，為 CTS 帶來了 60 名新團隊成員。此次收購加強了我們在國防端市場的策略和規模，進一步推進了我們的多元化策略，並帶來了約5億美元的潛在市場。我們對 SyQwest 的收購預計將為今年餘下的收入增加 1,000 萬至 1,400 萬美元。我很高興歡迎 Bob Tarini 和他的優秀團隊加入 CTS。

Non-transportation sales continued to improve, increasing 11% sequentially and up 4% in the second quarter compared to the prior year period. And medical market sales were up 6% sequentially and 4% from the same period in 2023. We saw mixed signals with some customers performing well and others showing some softness. Bookings in medical were also up sequentially, and we expect continued momentum in the second half.

非交通運輸銷售持續改善，比上一季成長 11%，第二季比去年同期成長 4%。醫療市場銷售額較上季成長 6%，較 2023 年同期成長 4%。我們看到了混合訊號，有些客戶表現良好，而有些客戶則表現出一些疲軟。醫療預訂量也連續上升，我們預計下半年將繼續保持這種勢頭。

During the quarter, we had a large win for medical therapeutics, multiple wins for diagnostic ultrasound across all regions, and a win for temperature sensing. We added two new customers in the quarter. The first, an important win for a new lead-free application and drug delivery; and the second, a win for a minimally invasive optical application.

在本季度，我們在醫療治療方面取得了重大勝利，在所有地區的診斷超音波方面取得了許多勝利，並且在溫度感測方面取得了勝利。我們在本季增加了兩位新客戶。第一，新的無鉛應用和藥物輸送的重要勝利；第二，微創光學應用的勝利。

Aerospace and defense sales were up 33% from the prior year period and up 41% sequentially. We expect good momentum for the rest of 2024, given the backlog of orders. We received multiple orders for hydrophones, sonar buoys, underwater unmanned applications, and RF filters.

航空航太和國防銷售額年增 33%，季增 41%。鑑於訂單積壓，我們預計 2024 年剩餘時間將呈現良好動能。我們收到了多個水聽器、聲納浮標、水下無人應用和射頻濾波器的訂單。

We continue to gain traction on European defense growth, securing an order for a new submarine program. We expect the long-term prospects for the aerospace and defense end market to be solid given our material formulations and the enhanced capabilities with the addition of SyQwest.

我們繼續吸引歐洲國防成長，並獲得新潛艇項目的訂單。鑑於我們的材料配方以及 SyQwest 的加入所帶來的增強能力，我們預計航空航天和國防終端市場的長期前景將是穩固的。

In the industrial market, overall, sales were up 4% sequentially as we continued to see a gradual recovery in distribution as well as with OEM sales. Sales were down 6% from the prior year period. Bookings were up year over year and flat sequentially, which is causing us to temper our growth expectations in the second half of 2024. We were successful with several wins in the quarter for industrial printing, EMC components, temperature sensing, flow metering, RF filters, and commercial appliances.

在工業市場，整體銷售額環比成長 4%，我們繼續看到分銷和 OEM 銷售逐步復甦。銷售額較去年同期下降 6%。預訂量同比增長，環比持平，這導致我們調整了 2024 年下半年的成長預期。本季我們在工業印刷、EMC 組件、溫度感測、流量計量、射頻濾波器和商用電器領域取得了許多勝利。

We added one new customer in the quarter in test and measurement. While we saw a small sequential improvement in distribution, sales, and bookings, inventories continued to return to more normal levels and distributor POS remained soft. Looking ahead for the year in non-transportation end markets, we expect that improvement in industrial and distribution end market revenue in the second half of 2024 but now expect more modest levels of growth.

我們在本季增加了一位測試和測量領域的新客戶。雖然我們看到分銷、銷售和預訂方面出現了小幅環比改善，但庫存繼續恢復到更正常的水平，分銷商 POS 仍然疲軟。展望今年非運輸終端市場，我們預期工業和分銷終端市場收入將在 2024 年下半年有所改善，但現在預期成長水準將更為溫和。

For medical markets, while we anticipate some softness with a few customers, we expect to continue growing in the second half. We also expect to make solid progress on the qualification of products for prospective new customers. Sales to the defense customers are expected to remain solid. Longer term, we expect our material formulations and in-house know-how to continue to support our growth in key high quality end markets, in line with our diversification strategy.

對於醫療市場，雖然我們預計少數客戶會疲軟，但我們預計下半年將繼續成長。我們也期望在為潛在新客戶提供產品的資格認證方面取得紮實進展。預計對國防客戶的銷售將保持穩定。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終端市場的成長，符合我們的多元化策略。

Additionally, we anticipate the megatrends 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.

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 $64.2 million in the second quarter, down approximately 22% from the same period last year and down 3% sequentially. We continue to experience a softer demand environment for commercial vehicle products in 2024. On the light vehicle front, as I mentioned earlier, we continue to navigate the market share dynamics in China, given the competition between local and transplant OEMs.

第二季運輸銷售額為 6,420 萬美元，比去年同期下降約 22%，比上一季下降 3%。2024 年，我們將持續經歷商用車產品需求疲軟的環境。在輕型汽車方面，正如我之前提到的，考慮到本土整車廠和移植整車廠之間的競爭，我們將繼續掌握中國市場份額的動態。

Additionally, we see demand for light vehicles continuing to soften, consistent with most market analysts forecasting reduced bill rates. The near-term growth rates for ICE versus EVs and hybrids are less of a concern for us given our products are mostly agnostic to the drivetrain technology.

此外，我們認為輕型車的需求持續疲軟，這與大多數市場分析師預測的帳單費率下降的情況一致。鑑於我們的產品大多與傳動系統技術無關，因此我們不太關心內燃機汽車與電動車和混合動力車的近期成長率。

In the second quarter, we had wins across various product groups, including accelerator modules with OEMs in North America, Europe, and China. We had a sensor win in North America for a chassis right height application. Across vehicle electrification, we had multiple wins for passive safety applications and a win for current sensing in an off-road application with an existing customer.

第二季度，我們在多個產品組中取得了勝利，包括與北美、歐洲和中國的 OEM 廠商合作的加速器模組。我們在北美贏得了底盤正確高度應用感應器的勝利。在車輛電氣化方面，我們在被動安全應用方面取得了許多勝利，並在越野應用中與現有客戶的電流感測方面取得了勝利。

We continue to see OEMs delay sourcing decisions as they work to correct our powertrain mix, given market changes. Our focus on adding new customers is progressing and we expect further traction later this year.

鑑於市場變化，我們繼續看到原始設備製造商推遲採購決策，因為他們致力於糾正我們的動力系統組合。我們對增加新客戶的關注正在取得進展，預計今年稍後將進一步受到關注。

Interest in eBrake product, offering weight and cost advantages continues across several OEMs. We expect the eBrake and other sensor applications will increase our ability to grow content with a potential [SAM] of greater than $1 billion. Total booked business was approximately $1.1 billion at the end of the quarter.

多家 OEM 廠商對 eBrake 產品的重量和成本優勢持續感興趣。我們預計 eBrake 和其他感測器應用程式將提高我們成長內容的能力，潛在 [SAM] 超過 10 億美元。截至本季末，預訂業務總額約 11 億美元。

Turning to our outlook for this year, the North American light vehicle market is expected to be in the 15.5 million to 16 million unit range with on-hand days of supply now back to more normal levels. European production is forecasted in the 17 million unit range and showing some softness. China volumes are expected to be in the 28 million unit range. Electric vehicle penetration rates have softened in some regions, while hybrid adoption continues to improve.

談到我們今年的展望，北美輕型汽車市場預計將在 1550 萬至 1600 萬輛之間，現有供應天數現已恢復到更正常的水平。歐洲產量預計在 1700 萬輛範圍內，並表現出一定的疲軟。中國銷售量預計在 2800 萬台左右。一些地區的電動車普及率下降，而混合動力車的普及率持續提高。

Overall, we anticipate a down market for light vehicle production due to the China market dynamics and other more recent regional build reductions. We expect softness in commercial vehicle related revenue throughout 2024.

總體而言，由於中國市場動態和其他最近的地區產量減少，我們預計輕型汽車生產市場將會下滑。我們預計 2024 年商用車相關收入將疲軟。

For non-transportation markets in line with our diversification strategy, we aim to expand the customer base in range of applications in the industrial, medical, and aerospace and defense end markets. The green shoots we mentioned last quarter in the form of inventory level corrections and improved bookings continue, but we anticipate a softer rate of recovery than we previously expected.

對於非運輸市場，根據我們的多元化策略，我們的目標是擴大工業、醫療、航空航太和國防終端市場應用範圍的客戶群。我們上季度提到的庫存水準調整和預訂量增加的復甦勢頭仍在繼續，但我們預計復甦速度將低於我們先前的預期。

Demand in the defense market is expected to remain solid, and we expect continued growth in medical. With industrial OEMs and distribution, we expect a more modest revenue improvement in the near term as inventory levels normalize and POS improves.

國防市場的需求預計將保持強勁，我們預期醫療市場將持續成長。對於工業 OEM 和分銷商，我們預計隨著庫存水準正常化和 POS 改善，短期內收入將出現較為溫和的成長。

In terms of guidance for full year 2024, we expect a more moderate growth rate in the second half and are adjusting our prior guidance. We now anticipate sales in the range of $525 million to $540 million and adjusted diluted earnings per share in the range of $2.05 to $2.25 included the expected impact from the SyQwest acquisition.

就 2024 年全年指引而言，我們預計下半年成長率將更加溫和，並正在調整先前的指引。我們目前預計銷售額將在 5.25 億美元至 5.4 億美元之間，調整後的稀釋每股收益將在 2.05 美元至 2.25 美元之間，其中包括 SyQwest 收購的預期影響。

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

現在我將把它交給 Ashish，他將向我們介紹更詳細的財務表現。阿什什？

Thank you, Kieran. Second quarter sales were $130 million. While sales were down 10% compared to the second quarter of 2023, we continued to see a modest recovery with sales up 4% sequentially. As Kieran mentioned, we are seeing softness in transportation end market sales. Non-transportation sales improved year-over-year as well as sequentially.

謝謝你，基蘭。第二季銷售額為 1.3 億美元。雖然銷售額與 2023 年第二季相比下降了 10%，但我們繼續看到溫和復甦，銷售額環比成長了 4%。正如基蘭所提到的，我們看到運輸終端市場銷售疲軟。非交通運輸銷售年比及較上季均有所改善。

Foreign currency changes impacted revenue unfavorably by approximately $0.5 million. Adjusted gross margin in the second quarter was 35.8%, an improvement of 80 basis points from the second quarter of last year despite the drop in revenue. Our teams globally, continue to focus on plant efficiency and cost improvements. Sequentially, adjusted gross margin was down 45 basis points, mainly due to some one-time charges.

外匯變動對收入產生了約 50 萬美元的不利影響。儘管營收下降，第二季調整後毛利率為35.8%，較去年第二季提高80個基點。我們的全球團隊持續專注於工廠效率和成本改進。隨後，調整後毛利率下降了 45 個基點，主要是由於一些一次性費用。

We are still experiencing some cost pressures, especially for certain materials and from labor cost increases. We expect pricing pressure this year, particularly in the transportation markets. We already see pressures in the China transportation market. We remain confident in our ability to drive efficiencies in our supply chain and manufacturing sites to improve our operational performance and profitability. The consolidation of the Juarez facility into our Matamoros site in Mexico has been completed, and the focus now is to improve operating efficiency.

我們仍然面臨一些成本壓力，特別是某些材料和勞動成本的增加。我們預計今年的價格壓力，特別是在運輸市場。我們已經看到中國運輸市場的壓力。我們對提高供應鏈和製造工廠的效率以提高營運績效和獲利能力的能力仍然充滿信心。華雷斯工廠併入墨西哥馬塔莫羅斯工廠的整合工作已經完成，現在的重點是提高營運效率。

During the second quarter of 2024, we benefited from some discrete tax-related items and as a result, had a tax rate of 17.6%. For 2024 overall, we expect our tax rate to be in the range of 18% to 21%. Earnings per diluted share were $0.48 in the second quarter. Adjusted earnings for the second quarter were $0.54 per diluted share compared to $0.59 per diluted share for the second quarter of last year.

2024 年第二季度，我們受惠於一些離散的稅務相關項目，因此稅率為 17.6%。2024 年整體而言，我們預計稅率將在 18% 至 21% 之間。第二季攤薄後每股收益為 0.48 美元。第二季調整後每股攤薄收益為 0.54 美元，去年第二季攤薄後每股收益為 0.59 美元。

Moving to cash generation and the balance sheet, we generated $20 million in operating cash flow in the second quarter of 2024 compared to $23 million in the second quarter of 2023. Our cash balance was $161 million as of June 30, 2024, and the long-term debt balance was $65 million.

轉向現金產生和資產負債表，我們在 2024 年第二季產生了 2,000 萬美元的營運現金流，而 2023 年第二季為 2,300 萬美元。截至 2024 年 6 月 30 日，我們的現金餘額為 1.61 億美元，長期債務餘額為 6,500 萬美元。

The SyQwest acquisition was funded with approximately $80 million in cash and the rest with borrowings from our existing credit facility. We remain focused on strong cash generation and continued to support organic growth, strategic acquisitions, and returning cash to shareholders. During the quarter, we repurchased 228,000 shares of CTS stock totaling approximately $11 million. Year to date, we have returned $26 million to shareholders through share repurchases and dividends.

SyQwest 的收購資金為約 8,000 萬美元現金，其餘資金則來自我們現有信貸額度的借款。我們仍然專注於強勁的現金生成，並繼續支持有機成長、策略性收購以及向股東返還現金。本季度，我們回購了 228,000 股 CTS 股票，總價值約 1,100 萬美元。今年迄今為止，我們已透過股票回購和股利向股東返還 2,600 萬美元。

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。

(Operator Instructions)

（操作員說明）

Joshua Buchalter, TD. counts.

約書亞·布查爾特，TD。很重要。

Hey guys. Good morning. Thanks for taking my question. I guess for my first one, any more details you can give us on expectations for transport into the back half of the year. I know you it sounds like you're expecting it directionally down, but I'd be curious if you could maybe quantify that a bit more, in particular so we can get a picture into what your expectations are for the non-transport growth that's going to offset that? Thank you.

嘿夥計們。早安.感謝您提出我的問題。我想對於我的第一個，您可以向我們提供有關今年下半年交通預期的更多詳細資訊。我知道你聽起來好像你預計它會定向下降，但我很好奇你是否可以進一步量化這一點，特別是這樣我們就可以了解你對非交通增長的預期會抵消嗎？謝謝。

Yeah, Josh, I think there's two parts to it on the commercial vehicle side. We've seen a decrease in revenue there. We talked about the competition in that market. So for the quarter, I think sales were down approximately about $10 million on a run rate basis. And we expect that's going to be a challenging market because the analysts and the reports out there are seeing softening in the commercial vehicle market for the balance of 2024 and more flat market in 2025.

是的，喬什，我認為商用車方面有兩個部分。我們看到那裡的收入有所下降。我們討論了該市場的競爭。因此，我認為本季的銷售額按運行率計算大約下降了 1000 萬美元。我們預計這將是一個充滿挑戰的市場，因為分析師和報告認為 2024 年剩餘時間商用車市場將疲軟，而 2025 年市場將更加穩定。

On the light vehicle side, we feel good about North America, we feel reasonable about Europe. China remains a challenge and that's where we're really navigating as carefully as we can to make improvements. But that's probably how I'd describe it overall.

在輕型車輛方面，我們對北美感覺良好，對歐洲感覺合理。中國仍然是一個挑戰，而這正是我們真正要盡可能謹慎地改進的地方。但這可能是我總體上描述它的方式。

Okay. I guess to follow up on that, if I put in a modest assumptions for transport down sequentially the back half, you've got sort of the industrial and other markets growing probably double digits, half-over-half in the second half of 2024. I guess how much of that is panel just coming back to normal versus actual demand improvement, maybe you could help us on the visibility as what's driving that second half improvement? Thank you.

好的。我想接下來，如果我對下半年的交通運輸做出適度的假設，那麼工業和其他市場的成長可能會達到兩位數，到 2024 年下半年將成長一半以上。我想其中有多少是面板剛剛恢復正常與實際需求改善相比，也許您可以幫助我們了解推動下半年改善的因素？謝謝。

Yeah, Josh. Probably the best way I'd describe the second half is again, challenging on transportation and then more modest growth rates in the non-transportation area. So if we're looking from an organic perspective, from where we finished in the second quarter up a few million in terms of growth rate by quarter.

是的，喬許。也許我描述下半年的最好方式是，運輸領域再次面臨挑戰，然後非運輸領域的成長率更為溫和。因此，如果我們從有機角度來看，從第二季的成長率來看，我們按季度增長了幾百萬美元。

Okay. Thanks. I'll squeeze one more in. On gross margins, you called out some onetime cost headwinds in the second quarter, but also pricing pressure. I mean if I zoom out, you're still at 36% gross margin on some modest growth this year or be actually more of a flattish here. It seems like pricing is hanging in okay. Is that sort of the right read? I know you called out some pricing pressure. And how should we think about gross margins in the second half of the year as that onetime cost headwind abate? Thank you, both.

好的。謝謝。我再擠一顆進去。關於毛利率，您指出了第二季的一些一次性成本阻力，以及定價壓力。我的意思是，如果我縮小範圍，今年的毛利率仍然是 36%，並且略有增長，或者實際上更加持平。看來定價還不錯。這樣的讀法正確嗎？我知道您提出了一些定價壓力。隨著一度的成本逆風減弱，我們該如何看待下半年的毛利率？謝謝你們，兩位。

So Josh, I think your read on pricing is accurate. We are managing through it right now, but we expect the pressures to continue. And our teams are staying focused on managing it appropriately to make sure that we maintain good long-term relations with our customer base, but also navigate through winning business with them and preserving price as much as possible, so that equation is working, okay. As I mentioned, there's a little bit more pressure in China than other regions, but the teams are overall managing okay.

所以喬希，我認為你對定價的理解是準確的。我們目前正在應對這項挑戰，但我們預計壓力將持續下去。我們的團隊將繼續專注於適當的管理，以確保我們與客戶群保持良好的長期關係，同時也透過與他們贏得業務並盡可能保持價格來進行導航，以便這個等式發揮作用。正如我所提到的，中國隊的壓力比其他賽區要大一些，但隊伍總體管理得還不錯。

In the second half in terms of the gross margin, we do expect some improvements mainly because of the change in mix of the business, and we expect to continue driving improvements in our factory efficiency levels as we work through the completion of the Matamoros and Juarez transition and other improvements that we are driving through the non-transportation plants as well. So expect modest improvements in profitability in the second half of the year.

就毛利率而言，我們預計下半年毛利率會有所改善，主要是因為業務組合的變化，並且隨著馬塔莫羅斯和華雷斯工廠的竣工，我們預計將繼續推動工廠效率水平的提高我們也在透過非運輸工廠推動轉型和其他改進。因此，預計下半年獲利能力將略有改善。

Thank you, Ashish. Appreciate it.

謝謝你，阿什什。欣賞它。

John Franzreb, Sidoti.

約翰·弗蘭茨雷布，西多蒂。

Good morning, guys, and thanks for taking the questions. I would like to start with the SyQwest acquisition. Could you tell us a little bit about maybe its recent growth profile and its margin profile before you acquired it?

早上好，夥計們，感謝您提出問題。我想從收購 SyQwest 開始。您能否告訴我們一些有關其最近的成長概況以及收購之前的利潤概況的資訊？

Yeah, John. We're really happy to have Bob Tarini and the team join CTS. SyQwest has one or more products installed in every US surface combatant ship or submarine. And the growth rate is quite robust. We really like it, and the gross margin profile would be above the average for the company.

是的，約翰。我們非常高興 Bob Tarini 和他的團隊加入 CTS。SyQwest 在每艘美國水面戰艦或潛水艇上都安裝了一種或多種產品。而且成長速度相當強勁。我們真的很喜歡它，而且毛利率將高於公司的平均水平。

Okay. And can you share with us the EBITDA multiple you acquired the company at?

好的。您能否與我們分享您收購該公司的 EBITDA 倍數？

John, I don't specifically call that out, but when you look at the growth rate of the business, the profitability, the EBITDA multiples make sense to us. And you know, we normally don't like to overpay for businesses. So let me leave it at that. But I think internally we are very pleased with the acquisition. We look to the growth momentum that the business has and the profitability that the business brings to us as well.

約翰，我並沒有特別指出這一點，但是當你看看業務的成長率、獲利能力、EBITDA 倍數對我們來說是有意義的。你知道，我們通常不喜歡為企業支付過高的費用。那麼就讓我就這樣吧。但我認為我們內部對這項收購非常滿意。我們專注於業務的成長動力以及業務為我們帶來的獲利能力。

John, just to add to that it' s -- the product's just like CTS, are highly engineered. It up integrates us from components into sensors and systems and transducers, a very capable team, high-quality business. And we really like the momentum they have and we have in the defense markets. And how it's going to really advance our diversification, which is a key part of what we're doing as a company as well. So we feel very good about it and the team and capability.

約翰，補充一點，該產品就像 CTS 一樣，經過精心設計。它把我們從組件整合到感測器、系統和換能器，一個非常有能力的團隊，高品質的業務。我們真的很喜歡他們和我們在國防市場上的勢頭。以及它將如何真正推動我們的多元化，這也是我們作為一家公司正在做的事情的關鍵部分。所以我們對它、團隊和能力感覺非常好。

Okay. And I'll just keep on sticking to SyQwest here. Are they exposed or overexposed to the Virginia, Columbia class or any particular surface platform? Do you have any -- can you share a sense of what they sell into? What platform they sell into?

好的。我將繼續堅持使用 SyQwest。他們是否暴露或過度暴露於弗吉尼亞級、哥倫比亞級或任何特定的水面平台？您有嗎—可以分享一下他們銷售的產品嗎？他們賣到什麼平台？

John, as I mentioned, they're on every combatant ship and submarine; so Ohio, Virginia, there's several of them in there. And obviously, there's products that are being renewed there. One of the things we see is that the Navy, at this point in time, is at a critical point in terms of modernizing their fleet and their combat readiness as well. So we feel good about the slots they're in and the sockets they have.

約翰，正如我所提到的，它們出現在每艘戰艦和潛艇上；俄亥俄州、維吉尼亞州，那裡有好幾個。顯然，那裡的產品正在更新。我們看到的一件事是，海軍目前正處於艦隊現代化和戰備狀態的關鍵時刻。所以我們對它們的插槽和插座感覺很好。

Okay. And can you take the sensor products and move them to adjacent applications? Or are they're protected under military restrictions?

好的。您能否將感測器產品轉移到相鄰的應用？還是他們受到軍事限制的保護？

Hey, John. Primarily, the growth focus with us here will be in defense. And we talked about the US Navy. But obviously, with the cooperation the US has with other countries internationally, there are opportunities there as well.

嘿，約翰。首先，我們這裡的成長重點將是防守。我們談到了美國海軍。但顯然，隨著美國與其他國家在國際上的合作，那裡也有機會。

Got it. Okay. That's it for SyQwest then. Moving on to the legacy business. In the industrial side of the market, you talked about slowing. But you didn't -- I didn't hear you call out what parts of the or subsets of the industrial market is slowing. If you did, I apologize, but can you talk about that a little bit?

知道了。好的。SyQwest 就這樣​​了。繼續處理遺留業務。在市場的工業方面，您談到了放緩。但你沒有——我沒有聽到你指出工業市場的哪些部分或子集正在放緩。如果你這樣做了，我很抱歉，但是你能談談這一點嗎？

Yeah, John. I mean, sequentially, the business was up 4%, so we see some improvement there. But first of all, I think on industrial printing and if you look at the building industry at the moment with HVAC and temperature things, things are like flatlining a little bit there in those markets because demand is not up. So that's how I'd best describe it. And with distribution, we've seen some marginal improvement, and we feel like it will improve, but not at the rate we were expecting. So it's a pretty mixed bucket there.

是的，約翰。我的意思是，業務連續成長了 4%，所以我們看到了一些改善。但首先，我認為在工業印刷方面，如果你看看目前建築業的暖通空調和溫度問題，你會發現這些市場的情況有些持平，因為需求沒有上升。這就是我最好的描述方式。透過分銷，我們看到了一些邊際改善，我們覺得它會改善，但沒有達到我們預期的速度。所以這是一個相當混合的桶子。

Got it. And does that change? Any thoughts about your cash flow generation for the second half of the year relative to the first half to slowing end markets?

知道了。這會改變嗎？相對於上半年的終端市場放緩，您對下半年的現金流量產生有何看法？

John, generally our cash flow generation is stronger in the second half of the year than in the first. At a high level, I would expect that trend to continue, but the expectations of the amount of cash we would generate would moderate based on the reduction in number the sales expectations.

約翰，一般來說，我們下半年的現金流量比上半年更強。在較高層面上，我預計這種趨勢將持續下去，但我們產生的現金量的預期將根據銷售預期數量的減少而有所緩和。

Okay. Thanks, guys. I'll get back into queue.

好的。謝謝，夥計們。我會回到隊列中。

Thanks, Joshua.

謝謝，約書亞。

Hendi Susanto, Gabelli Funds.

Hendi Susanto，Gabelli 基金。

Good morning, Kieran And Ashish. My first question is about SyQwest. Would you be able to indicate whether the transaction will be accretive, neutral, or dilutive to EPS?

早上好，基蘭和阿什什。我的第一個問題是關於 SyQwest 的。您能否說明該交易是否會增加、中性或稀釋每股盈餘？

Yes, it will be accretive in 2025, Hendi.

是的，Hendi，到 2025 年它會增加。

Hendi, we expect a small unfavorable impact in 2024 in the range of $0.04 to $0.05. But then as Kieran mentioned, in 2025 we are expecting it to be accretive.

Hendi，我們預計 2024 年將產生 0.04 美元至 0.05 美元之間的小幅不利影響。但正如 Kieran 所提到的，我們預計到 2025 年它會有所增加。

Okay. And then any indication on how much it will increase your OpEx, Ashish?

好的。Ashish，有沒有跡象表明它將增加您的營運支出多少？

Let us work through that, Hendi. It's a private business that was run differently than we would be looking to do the accounting and all that. So what is gross margin? What is operating expenses? It take us a little bit of time to get all that sorted out. So I expect to have more clarity in the coming months.

讓我們一起努力解決這個問題吧，亨迪。這是一家私人企業，其運作方式與我們希望進行會計等工作的方式不同。那什麼是毛利率呢？什麼是營業費用？我們需要一點時間來解決所有問題。因此，我希望在接下來的幾個月裡情況會更加清晰。

Yeah. And then, Kieran, I have a question on let's say more modest expectation for the second half. Does that imply that things -- that you have pointed in terms of softness and the softness will last through the end of the year or whether certain things may see a recovery sometime in the fourth quarter?

是的。然後，基蘭，我有一個問題，讓我們對下半年的預期更加溫和。這是否意味著您所指出的疲軟情況將持續到今年年底，或者某些事情是否可能在第四季度的某個時候出現復甦？

Hendi, so in non-transportation, we feel very good about defense. We feel good about medical, but the tone we're setting here is on the industrial side, it's more modest growth rate than we had expected earlier in the year. So we'll see some growth, but at a much more modest level.

Hendi，所以在非運輸方面，我們對防守的感覺非常好。我們對醫療產業感覺良好，但我們在這裡定下的基調是在工業方面，其成長率比我們今年早些時候的預期更為溫和。因此，我們會看到一些成長，但成長幅度要小得多。

And then any color on your, let's say, your expectation between third quarter and fourth quarter as of now? I know that fourth quarter is still months away.

那麼截至目前，您對第三季和第四季的預期有何不同？我知道第四季還有幾個月的時間。

Yeah, I think, Hendi, if you take the profile where we're coming for with $130 million in the -- on an organic basis, the $130 million in the second quarter, I think you'll see a small a few million improvement in the third and fourth quarter directionally is how I'd put it.

是的，我想，Hendi，如果你看看我們在第二季度有機基礎上 1.3 億美元的目標，即 1.3 億美元，我想你會看到幾百萬美元的小幅改進我是這麼說的：第三季和第四季的方向是。

Okay, got it. And then with regard to China, is your expectation -- when you said like channel challenging, like will it be challenging like throughout the year? Meaning that any type of improvement, we should be more patient and expect that to be more in 2025?

好的，明白了。那麼關於中國，當你說通路具有挑戰性時，你的期望是否會像全年一樣充滿挑戰？這意味著對於任何類型的改進，我們都應該更加耐心，並期望 2025 年會更加耐心？

I think Hendi, it's going to remain challenging throughout the rest of this year. I read recently and you probably saw too that the Chinese government has added new incentives going from I think it was RMB7,000 to RMB15,000 for light vehicles under 2 liter. So that'll provide some incentive and health for some of the transplant OEMs. But we think it will just kind of level out the softness is there rather than giving us gains.

我認為亨迪，今年剩下的時間仍將充滿挑戰。最近讀到，你可能也看到，中國政府增加了新的激勵措施，對2公升以下的輕型汽車從7000元到15000元不等。因此，這將為一些移植原始設備製造商提供一些激勵和健康。但我們認為這只會緩解市場的疲軟狀況，而不是為我們帶來收益。

I see. Okay. And then last question for me, Kieran. Post-SyQwest acquisition, are you still actively looking for potential acquisitions or should we expect that you will focus on integrating this business? And then, therefore, you would be less active on your M&A pipeline?

我懂了。好的。然後是我的最後一個問題，基蘭。收購 SyQwest 後，您是否仍在積極尋找潛在的收購，或者我們是否應該期望您將重點放在整合該業務上？那麼，您在併購管道上的積極性就會降低嗎？

So Hendi, two parts to that question. Number one, we're really delighted with the SyQwest acquisition, the way it increases our diversification, quality of earnings and the strength it gives us in the defense market. And this team is a very entrepreneurial team. We want to make sure we don't lose that as part of how we integrate together. So Bob Tarini and the team have got excellent momentum there. And on the flip side, we're also active in working our pipeline going forward.

Hendi，這個問題分為兩個部分。第一，我們對 SyQwest 的收購感到非常高興，它提高了我們的多元化、盈利品質以及它賦予我們在國防市場的實力。而這個團隊是一個非常有創業精神的團隊。我們希望確保我們在整合過程中不會失去這一點。因此，鮑勃·塔里尼（Bob Tarini）和團隊在那裡取得了良好的勢頭。另一方面，我們也積極推進我們的管道工作。

Okay. Thank you, Kieran.

好的。謝謝你，基蘭。

We've got a good balance sheet, so we want to make sure we're using it appropriately.

我們擁有良好的資產負債表，因此我們希望確保正確使用它。

Yeah.

是的。

(Operator Instructions)

（操作員說明）

John Franzreb, Sidoti.

約翰·弗蘭茨雷布，西多蒂。

Yeah. Just a follow-up on Hendi's question about the dilution in SyQwest. I think you said $0.04 to $0.05 is the expectation in the second half of the year, but accretive in 2025. So can we assume it recaptures that $0.04 to $0.05 or should we be thinking above that dilution number for next year?

是的。只是 Hendi 關於 SyQwest 稀釋問題的後續。我想你說過 0.04 至 0.05 美元是下半年的預期，但到 2025 年會有所增加。那麼我們是否可以假設它重新奪回 0.04 美元至 0.05 美元，或者我們是否應該考慮明年的稀釋數字？

So John, it will be in addition to that $0.04 to $0.05 loss that we are expecting in 2024.

所以約翰，這將是我們預計 2024 年 0.04 至 0.05 美元損失之外的損失。

Okay. That's I just wanted to get that. Thank you, guys.

好的。那就是我只是想得到它。謝謝你們，夥計們。

Sure.

當然。

(Operator Instructions) As we have no further questions, I'll hand the call back to the management team for any concluding remarks.

（操作員說明）由於我們沒有其他問題，我會將電話轉交給管理團隊以獲取任何結論性意見。

Thanks, Adam, and thank you all for your time. At CTS, we remain focused on future growth driven by the megatrends of increased automation, connectivity, energy efficiency, and minimally invasive medical innovation. The continued expansion of our customers and pipeline of opportunities underscore our confidence in our future. We're delighted to add the Cypress team to CTS and excited about our future growth potential in defense applications. Thank you for joining us today. This concludes our call.

謝謝亞當，也謝謝大家抽出寶貴的時間。在 CTS，我們仍然專注於由自動化、連接性、能源效率和微創醫療創新等大趨勢驅動的未來成長。我們的客戶和機會管道的持續擴大增強了我們對未來的信心。我們很高興將賽普拉斯團隊加入 CTS，並對我們在國防應用方面的未來成長潛力感到興奮。感謝您今天加入我們。我們的通話到此結束。

This concludes today's call. Thank you very much for your attendance, and you may now disconnect your lines.

今天的電話會議到此結束。非常感謝您的出席，您現在可以斷開線路了。