CTS Corporation reports 222% Net Income growth in 2018 and 11.2% Revenue growth
02/05/2019 • About CTS Corporation (
$CTS) • By InTwits
CTS Corporation reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- CTS Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.2%. At the same time it's in pair with industry average of 3.6%
- CAPEX is quite volatile: $28m in 2018, $18m in 2017, $21m in 2016, $10m in 2015, $13m in 2014
- The company has highly profitable business model: ROIC is 14.8%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
CTS Corporation's Revenue jumped on 11.2%. Revenue growth showed slowdown in 18Q4 - it was 8.3% YoY. Revenue decline was slowing down on average by 3.7 pp per annum in 2014-2018. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 9.9 pp from 11.0% to 1.1% in FY2018.
Gross Margin increased slightly on 1.9 pp from 33.2% to 35.1% in 2018. SG&A as a % of Revenue decreased slightly on 1.4 pp from 17.0% to 15.6% in 2018. During 2014-2018 SG&A as a % of Revenue topped in 2017 at 17.0%.
Net Income margin increased on 6.5 pp from 3.4% to 9.9% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 CTS Corporation had CAPEX/Revenue of 6.1%. CAPEX/Revenue increased on 3.5 pp from 2.5% in 2015 to 6.1% in 2018. For the last three years the average CAPEX/Revenue was 5.2%.
Return on investment
The company operates at good ROIC (14.8%) and ROE (12.9%). ROIC increased on 5.0 pp from 9.8% to 14.8% in 2018. ROE increased on 8.5 pp from 4.4% to 12.9% in 2018.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.6x and Debt / EBITDA is 0.6x. Debt dropped on 34.5% while cash dropped on 11.1%.
The company has no short term refinancing risk: short term debt is zero.
Valuation and dividends
The company's trades at EV/EBITDA 11.4x and P/E 21.5x.
Management team
Kieran M O'Sullivan is a CTS Corporation's CEO. Kieran M O'Sullivan is a founder and has spent 6 years with the company. The company's CFO is Ashish Agrawal. Ashish Agrawal has 5 years tenure at the company.
Financial and operational results
FY ended 12/31/2018
CTS Corporation ($CTS) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 404.0 | 382.3 | 396.7 | 423.0 | 470.5 | 11.2% |
| Gross Profit | 130.0 | 127.1 | 140.4 | 140.4 | 165.0 | 17.5% |
| SG&A | 59.1 | 57.4 | 61.6 | 71.9 | 73.6 | 2.3% |
| EBITDA | 59.3 | 34.4 | 82.2 | 59.2 | 83.6 | 41.2% |
| Net Income | 26.5 | 7.0 | 34.4 | 14.4 | 46.5 | 222.1% |
Balance Sheet
|
|---|
| Cash | 134.5 | 156.9 | 113.8 | 113.6 | 100.9 | -11.1% |
| Short Term Debt | 0.0 | 0.0 | 1.0 | 0.0 | 0.0 | |
| Long Term Debt | 75.0 | 90.7 | 89.1 | 76.3 | 50.0 | -34.5% |
Cash flow
|
|---|
| Capex | 12.9 | 9.7 | 20.5 | 18.1 | 28.5 | 57.4% |
Ratios
|
|---|
| Revenue growth | -1.3% | -5.4% | 3.8% | 6.6% | 11.2% | |
| EBITDA growth | 52.6% | -42.0% | 139.1% | -28.0% | 41.2% | |
|
|---|
| Gross Margin | 32.2% | 33.2% | 35.4% | 33.2% | 35.1% | 1.9% |
| EBITDA Margin | 14.7% | 9.0% | 20.7% | 14.0% | 17.8% | 3.8% |
| SG&A, % of revenue | 14.6% | 15.0% | 15.5% | 17.0% | 15.6% | -1.4% |
| Net Income Margin | 6.6% | 1.8% | 8.7% | 3.4% | 9.9% | 6.5% |
| CAPEX, % of revenue | 3.2% | 2.5% | 5.2% | 4.3% | 6.1% | 1.8% |
|
|---|
| ROIC | 11.4% | 5.3% | 18.1% | 9.8% | 14.8% | 5.0% |
| ROE | 9.0% | 2.4% | 11.5% | 4.4% | 12.9% | 8.5% |
| Net Debt/EBITDA | -1.0x | -1.9x | -0.3x | -0.6x | -0.6x | 0.0x |
CTS Corporation ($CTS) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 114 | 118 | 119 | 120 | | 13.4% | 11.7% | 11.9% | 8.3% |
| EBITDA | 19 | 20 | 22 | 23 | | 11.5% | 10.2% | 16.3% | 314.4% |
| Net Income | 12 | 7 | 10 | 18 | | 36.1% | -27.7% | 6.2% | |
Balance Sheet
|
|---|
| Cash | 121 | 103 | 104 | 101 | | -0.4% | -4.6% | -10.7% | -11.1% |
| Short Term Debt | 0 | 0 | 0 | 0 | | -100.0% | -100.0% | | |
| Long Term Debt | 74 | 57 | 50 | 50 | | -21.3% | -38.6% | -39.2% | -34.5% |
Ratios
|
|---|
| Gross Margin | 33.9% | 35.4% | 35.4% | 35.5% | | -0.3% | 1.6% | 0.1% | 5.9% |
| EBITDA Margin | 16.6% | 17.0% | 18.1% | 19.3% | | -0.3% | -0.2% | 0.7% | 14.3% |
| Net Income Margin | 10.2% | 6.1% | 8.6% | 14.6% | | 1.7% | -3.3% | -0.5% | 26.9% |
Peers in Electronic Manufacturing Servi
Below we provide CTS Corporation benchmarking against other companies in Electronic Manufacturing Servi industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| RF Industries, Ltd. ($RFIL) | | 41.9% | -7.8% | -24.0% | 118.4% |
| Alpine 4 Technologies Ltd ($ALPP) | | | 35,893.8% | 5.8% | 71.5% |
| Kemet Corporation ($KEM) | | -1.3% | -10.7% | 3.1% | 58.4% |
| SMTC Corporation ($SMTX) | | -3.5% | -23.9% | -17.1% | 55.2% |
| Deswell Industries, Inc. ($DSWL) | | -7.0% | 17.1% | -0.1% | 36.3% |
| |
|---|
| Median (27 companies) | | 2.8% | 1.2% | 1.9% | 7.1% |
|---|
| CTS Corporation ($CTS) | | -5.4% | 3.8% | 6.6% | 11.2% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Neonode Inc. ($NEON) | 68.2% | 66.0% | 86.9% | 77.1% | 89.2% |
| Andrea Electronics Corp ($ANDR) | 83.8% | 99.1% | 88.5% | 96.2% | 70.4% |
| Data I/O Corporation ($DAIO) | 53.9% | 52.4% | 55.0% | 58.9% | 59.4% |
| IPG Photonics Corporation ($IPGP) | 54.1% | 54.6% | 54.9% | 56.6% | 54.8% |
| RF Industries, Ltd. ($RFIL) | 45.2% | 34.3% | 28.0% | 30.4% | 34.1% |
| |
|---|
| Median (27 companies) | 14.5% | 14.8% | 16.7% | 13.8% | 12.1% |
|---|
| CTS Corporation ($CTS) | 32.2% | 33.2% | 35.4% | 33.2% | 35.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| IPG Photonics Corporation ($IPGP) | 41.5% | 42.4% | 41.8% | 44.7% | 40.9% |
| TE Connectivity Ltd. ($TEL) | 19.7% | 19.3% | 20.9% | 20.4% | 21.4% |
| Methode Electronics, Inc. ($MEI) | 12.6% | 15.4% | 16.5% | 16.5% | 16.1% |
| RF Industries, Ltd. ($RFIL) | 12.4% | 6.7% | -12.1% | 3.1% | 15.9% |
| Kemet Corporation ($KEM) | 3.8% | 7.7% | 9.7% | 9.7% | 13.6% |
| |
|---|
| Median (27 companies) | 4.4% | 5.2% | 4.8% | 4.5% | 4.7% |
|---|
| CTS Corporation ($CTS) | 14.7% | 9.0% | 20.7% | 14.0% | 17.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Maxwell Technologies, Inc. ($MXWL) | 3.7% | 2.5% | 4.9% | 6.6% | 11.3% |
| IPG Photonics Corporation ($IPGP) | 11.5% | 7.8% | 12.6% | 9.0% | 11.0% |
| eMagin Corporation ($EMAN) | 5.8% | 4.7% | 6.7% | 6.2% | 8.8% |
| TE Connectivity Ltd. ($TEL) | 5.3% | 4.9% | 5.3% | 5.6% | 6.7% |
| Kemet Corporation ($KEM) | 3.9% | 2.7% | 2.8% | 3.4% | 5.4% |
| |
|---|
| Median (27 companies) | 2.5% | 2.4% | 2.8% | 2.7% | 2.4% |
|---|
| CTS Corporation ($CTS) | 3.2% | 2.5% | 5.2% | 4.3% | 6.1% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| RF Industries, Ltd. ($RFIL) | 8.5% | 4.6% | -18.7% | 0.9% | 29.2% |
| IPG Photonics Corporation ($IPGP) | 27.0% | 27.8% | 25.1% | 29.9% | 22.9% |
| Methode Electronics, Inc. ($MEI) | 19.7% | 26.1% | 22.7% | 20.8% | 19.2% |
| TE Connectivity Ltd. ($TEL) | 17.3% | 15.1% | 15.9% | 16.2% | 18.4% |
| Kemet Corporation ($KEM) | -2.8% | 3.8% | 6.2% | 6.9% | 16.9% |
| |
|---|
| Median (29 companies) | 4.4% | 5.0% | 6.2% | 4.2% | 6.4% |
|---|
| CTS Corporation ($CTS) | 11.4% | 5.3% | 18.1% | 9.8% | 14.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpine 4 Technologies Ltd ($ALPP) | | | | 34.1x | 65.7x |
| SigmaTron International, Inc. ($SGMA) | 2.7x | 4.1x | 2.4x | 3.4x | 16.0x |
| SMTC Corporation ($SMTX) | 3.5x | 1.8x | 1.0x | | 11.3x |
| IEC Electronics Corp. ($IEC) | 7.1x | 14.0x | 2.0x | 5.6x | 4.9x |
| Key Tronic Corporation ($KTCC) | 0.2x | 3.4x | 2.6x | 2.5x | 3.9x |
| |
|---|
| Median (22 companies) | 0.2x | -0.2x | 0.6x | 0.5x | 0.5x |
|---|
| CTS Corporation ($CTS) | -1.0x | -1.9x | -0.3x | -0.6x | -0.6x |
