CTS Corporation (NYSE:CTS) Q1 2023 Earnings Conference Call April 27, 2023 10:00 AM ET

Company Participants

Kieran O’Sullivan - President and Chief Executive Officer

Ashish Agrawal - Chief Financial Officer

Conference Call Participants

Justin Long - Stephens

John Franzreb - Sidoti

Hendi Susanto - Gabelli Funds

Joshua Buchalter - TD Cowen

Operator

Good morning, and thank you for attending today's CTS Q1 2023 Earnings Call. My name is Daniel, and I'll be the moderator for today's call. [Operator Instructions] It is now my pleasure to pass the conference over to our host, Kieran O'Sullivan, CEO. Kieran, you may proceed.

Kieran O’Sullivan

Thanks, Daniel. Good morning, and thank you for joining our first quarter 2023 earnings call. We posted solid quarterly top and bottom line results in a mixed global economy. The semiconductor supply challenge we highlighted in the past two quarters has been resolved due to the focus and management of our transportation team. Our focus on profitable growth, driving diversification through our advanced materials capability and growth through electrification and mobility markets with innovative new products remain our highest priorities.

We are energized and focused on achieving our long-term strategic growth goals and improving our operational performance while we navigate the current macroeconomic challenges. For the first quarter of 2023, sales were $146 million, a decrease of 1.2% from the same period last year. Adjusted gross margin was 35.4%, down 180 basis points from the same period in 2022. Foreign currency changes impacted our gross margin unfavorably by approximately 120 basis points.

Adjusted EBITDA margin was 21.9%, down 164 basis points versus the first quarter of last year. Adjusted diluted earnings per share was $0.61, down $0.06, compared to the first quarter of 2022. Operating cash flow was $11.2 million, compared to $19.3 million in the first quarter of last year. New business awards were stronger in the quarter. We added nine new customers and had a book-to-bill of 0.96, and total book-to-business in transportation increased to $1.5 billion.

We continue to make progress on our diversification strategy as non-transportation sales increased to approximately 49% of our overall revenue, up from 46% in the first quarter of last year.

Ashish will now take us through the safe harbor statement. Ashish?

Ashish Agrawal

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 in the investors section of the CTS website.