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CTS Corporation (NYSE:CTS) reported flat revenue but improved margins in its first quarter 2025 earnings presentation on April 30, as strong performance in diversified markets successfully counterbalanced continued weakness in transportation. The electronic components manufacturer demonstrated progress in its multi-year strategy to reduce reliance on automotive markets.
Quarterly Performance Highlights
CTS reported Q1 2025 revenue of $126 million, unchanged from the same period last year, while adjusted diluted earnings per share increased 7% to $0.44. The company’s adjusted gross margin improved by 77 basis points to 37%, reflecting enhanced operational efficiency despite challenging market conditions.
"Our diversified end markets delivered solid growth, up 14% year-over-year and now representing 53% of our total revenue," noted the company in its presentation. This growth helped offset a 12% decline in the transportation segment, which continues to face headwinds from softness in China and increased competition in commercial vehicles.
The company’s book-to-bill ratio stood at a healthy 1.17, indicating strong future demand, while operating cash flow reached $16 million for the quarter.
As shown in the following quarterly performance summary:
Segment Performance Analysis
CTS’s aerospace and defense segment emerged as the standout performer, with sales surging 39% year-over-year and a robust book-to-bill ratio of 1.5. The company secured multiple orders for sonar, non-destructive testing, temperature sensing, and RF anti-jamming applications, demonstrating strong momentum in defense-related technologies.
The medical segment also performed well, with sales increasing 13% compared to Q1 2024 and a book-to-bill ratio of 1.3. The company won programs in kidney stone treatment and intelligent imaging, while adding a new customer for an AI-driven ultrasound application.
The following chart illustrates the strong performance in these two key diversified markets:
The industrial segment posted more modest growth of 4% year-over-year with a book-to-bill ratio of 1.2. CTS added two new customers in this segment, one for a flowmeter application and another for temperature sensing.
In contrast, the transportation segment continued its downward trend with a 12% year-over-year decline, primarily attributed to weakness in China and competitive pressures in the commercial vehicle market. Despite these challenges, the company reported $1 billion in total booked business at the end of Q1 and secured a new vehicle footwell integration win with a North American OEM in April.
The following chart shows the contrasting performance between industrial and transportation segments:
This segment performance aligns with trends observed in the company’s Q3 2024 results, where transportation sales had declined 17% while diversified markets showed strength, particularly in aerospace and defense which had grown 89% at that time.
Financial Position and Cash Flow
CTS maintained a strong financial position with $90 million in cash against $87 million in borrowed debt, with access to a total facility of $400 million. The company generated $16 million in operating cash flow during Q1 2025, slightly lower than the $18 million reported in Q1 2024 but still demonstrating consistent cash generation capabilities.
Capital expenditures for the quarter totaled $4 million, resulting in free cash flow of $11 million. The company returned $8 million to shareholders during the quarter, continuing its commitment to shareholder returns.
The following chart details the company’s cash flow performance:
The company’s financial summary shows stable revenue across recent quarters while net income and diluted EPS have improved. SyQwest, a recent acquisition, contributed $3 million in revenue during the quarter, supporting the company’s diversification strategy.
As shown in this comprehensive financial summary:
Forward Guidance and Outlook
CTS maintained its full-year 2025 revenue guidance at $550 million, representing a moderate increase from 2024’s $515 million. The company expects adjusted diluted EPS of $2.35 for the full year, which would mark an improvement over 2024’s $2.12.
Key assumptions underlying this guidance include monitoring the impact of tariffs, continuation of current market conditions, continued progress in diversified end markets, and an expected tax rate in the range of 19-21%.
The following chart illustrates the company’s revenue and EPS guidance in historical context:
"We’re continuing to monitor the impact of tariffs while maintaining our focus on diversified end markets," the company noted in its presentation, highlighting its strategic priorities for the remainder of 2025.
The guidance suggests management confidence in the company’s ability to navigate ongoing transportation market challenges through its diversification strategy, operational improvements, and strategic acquisitions like SyQwest.
CTS’s stock closed at $39.89 on April 29, 2025, and was trading up 1.28% at $40.40 in pre-market trading following the earnings presentation.
Full presentation:
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