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..

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?.

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

one for traditional medical diagnostics and another for a heart mapping application. We also added a new therapeutic customer for a cancer treatment. Our temperature portfolio continues to support growth in medical applications, and we secured a win for a respiratory application.

We see solid momentum going forward with existing and new customers and expansion into new applications. We remain confident in the long-term prospects for the aerospace and defense end market given our enhanced capabilities and attractive new material formulations.

Last quarter, we discussed the development efforts for a new application in underwater depth detection. Our team was successful in partnering with a new customer and secured this order. We received multiple orders across several defense Tier 1s for sonar, hydrophone, and sonobuoy applications.

With temperature sensing products, we received orders for aerospace applications. We continue to make progress in unmanned underwater vehicle applications, where we are deploying our single crystal technology and had a win for our traditional piezo ceramic product in this field.

We received a new award for an ultrasonic welding application for a mission-critical recording beacon. Leveraging the Ferroperm acquisition, we are developing new material formulations for defense applications in Europe and North America and are preparing samples for customers to test.

Looking ahead for 2023 for non-transportation end markets, we expect growth to remain mixed in certain industrial applications.

We also expect distribution will continue to adjust inventory levels, while in the defense and medical markets, we anticipate good growth and solid prospects, which we believe will continue to enhance our strategic diversification plans.

Transportation sales in the first quarter were negatively impacted by the short-term semiconductor shortage, which is now resolved. Sales were down 6% from the prior year period and up 4% sequentially from the fourth quarter of 2022. We anticipate automotive demand to be up single digits for this year.

We will continue to monitor for any potential impact in the second half of the year, due to consumer changes in confidence. We are also carefully tracking market changes in China given the competition between local and transplant OEMs.

In the first quarter, we had wins in the accelerated product line with Asian OEMs for the China and North American market. We also had an accelerator win with a North American OEM for their truck platform, a first for CTS in this area. Across Tier 1 automotive customers, we had multiple sensor wins for passive safety.

On the mechatronics front, we were awarded extensions related to existing products in commercial vehicle applications and are in development with new applications for the market. During the quarter, we launched new products on a North American electric vehicle deploying ride height sensing and an accelerator module with inductive technology.

Total booked business improved from $1.48 billion at the end of last year to $1.5 billion. We are driving to achieve our goal of having more than 25% of our light vehicle revenue come from electrified platforms by 2025.

Progress on securing electric vehicle wins continued as we added several electric vehicle application wins in the quarter, mostly with Asian OEMs for passive safety and chassis ride height sensing. We also had wins for accelerator modules on electrified platforms.

The move towards electric and hybrid vehicles, as well as increased sensor content with passive safety and future eBrake applications present tremendous opportunities for us. Smart actuators aside, most of our portfolio is agnostic to the propulsion system, creating flexibility for us to meet the needs of our customers.

During the quarter, I was able to spend time with our new European team at maglab, where we have a deep expertise in magnetic system design and current measurement solutions for use in e-mobility, industrial automation, and renewable energy applications.

The team is focused on several new growth opportunities and the completion of strategic partnerships to strengthen our product road map and position us for longer-term growth. The alignment and targeted market approach is gaining strength. As we look to our future, we are excited by the opportunity the transition to electrification offers us.

We see the footwell in the vehicle as a space where we expect to expand our product offering with traditional accelerator modules, new eBrake products offering weight and cost advantages and the future introduction of our Drive-Pad technology, a low travel vehicle velocity control product that simplifies the driver interface and increases the footwell design flexibility for our customers.

We expect these and other applications will increase our ability to grow content with an increasing SAM of $1 billion. Our balance sheet, bolstered by strong cash flow generation, continues to provide us with a solid foundation to further our diversification and electrification strategy.

Our capital deployment priorities remain focused on supporting organic growth investments, leveraging our financial strength to advance M&A in alignment with our long-term growth strategy and returning cash to shareholders.

We remain committed to effective capital management, while maintaining a disciplined approach to acquisitions as we've done in the past.

We are focused on acquisitions that meet our criteria, including enhancing our technology portfolio, strengthening customer relationships, as well as expanding products, applications, and markets and geographic reach. In-line with our capital allocation priorities, we continue to return cash to shareholders.

In this past quarter, we repurchased approximately $8.9 million of stock as part of the previously announced buyback program. At CTS, our purpose is to enable an intelligent and seamless world.

Through deep customer relationships, we play an instrumental role in helping our customers shape the future by designing components and solutions with effective and efficient technologies that make their products smarter.

I previously highlighted our strides in supporting innovative products like electric vehicles and how we play a pivotal role in promoting health and safety by supplying components used in non-invasive medical devices such as medical ultrasound.

We continue to grow and expand into new applications in this important medical field and expand our reach in electrified vehicle platforms. We understand that we have a responsibility to help shape not only a smarter future, but one that is mindful of the needs of future generations.

We've also worked to bring these values to life through our CTS Cares platform. I'm pleased to report that we recently issued our first ESG report, and we look forward to continuing to report on our progress in the future.

Summarizing our outlook for the year ahead, we expect increased safety, automation, connectivity, and efficiency needs will continue to drive demand for CTS solutions.

Our non-transportation end markets are growing, and we continue to use our core technology and domain expertise to expand our presence with new products and new customers while also finding deeper penetration in current end market applications. We expect the transportation market to be up single digits this year.

Looking at the North America light vehicle transportation market, the SAAR is expected to be in the 14 million to 15 million unit range for 2023. European production is forecasted in the 16 million to 17 million unit range. China volumes are expected in the 26 million unit range.

The commercial vehicle market remains solid, and we expect it to be robust throughout the first half of 2023. For non-transportation markets, in-line with our diversification strategy, we aim to expand the customer base on a range of applications in industrial, medical, and defense end markets.

In some cases, inventory levels are correcting to more normal levels, especially in certain industrial applications and in distribution. We expect demand in defense and medical markets to remain solid.

Overall, we are energized and focused on our long-term goals to drive profitable growth and improve our operational performance in the face of near-term challenges. We remain confident in the mid-to-long-term outlook of the company.

However, we are carefully monitoring the potential impact of macroeconomic and geopolitical conditions in the second half of this year.

Based on our current assessment of these conditions, in terms of guidance for full-year 2023, we expect results to trend closer to the lower end of our previously issued guidance for sales in the range of $580 million to $640 million and adjusted diluted earnings per share in the range of $2.40 to $2.70.

We expect to be in a position to provide a better view into the second half of the year in our next earnings update. Now, I'll turn it over to Ashish, who will walk us through our financial results in more detail.

Ashish?.

Thank you, Kieran. First quarter sales were $146 million, down 1%, compared to the first quarter of 2022 and up 3% sequentially from the fourth quarter of 2022. Foreign currency exchange rate changes impacted revenue unfavorably by approximately $2 million. Sales to non-transportation end markets increased 5% year-over-year.

The medical and defense end markets grew high single digits. As we expected, we experienced softness in the industrial end market. Sales to transportation customers decreased 6%, compared to the first quarter of 2022, primarily due to the short-term semiconductor shortage we experienced over the last 5 months to 6 months.

We were able to resolve the semiconductor supply shortage during the first quarter. Our recent acquisitions, Ferroperm, TEWA, and maglab, performed as we expected during the quarter, expanding our capabilities in several key end markets.

Our adjusted gross margin was 35.4% in the first quarter, down 180 basis points, compared to the first quarter of 2022. Foreign currency exchange rate changes impacted gross margin unfavorably by approximately $1.8 million.

We regularly hedge a portion of our currency exposure to reduce volatility, and these partial hedges are in place through the end of 2023. Inflation continues to pressure margins, and we continue to partner with our customers to partially share the burden of these cost increases. In the first quarter, we reported earnings of $0.58 per diluted share.

Adjusted earnings were $0.61 per diluted share, compared to $0.67 per diluted share in the same period last year and $0.56 per diluted share in the prior quarter. Included in the first quarter adjusted EPS are a couple of onetime favorable impacts. The first is a $0.02 favorability on tax related to equity-based compensation.

We also had approximately $1 million of favorability in operating expenses. These items are not expected to repeat in the coming quarters. Our tax rate was at 19.2% in the first quarter, due to the onetime equity compensation benefit, and we expect the full-year tax rate to be in the range of 21% to 23%, excluding discrete items.

Looking at the second quarter, we expect sales to the transportation end market to be robust as we resolve the supply challenge. We expect continued softness in distribution and in the industrial end market. Overall, our expectation is for revenues in the second quarter to be similar to the first quarter.

This mix shift in end market sales will unfavorably impact our gross margins in the second quarter. Although the unfavorable mix will be a headwind for the next few quarters, in the mid-to-long-term, we see strong momentum with our strategic path to diversify our business and deliver healthier margins.

Next, discussing our balance sheet and cash flow generation for the first quarter. We generated $11.2 million in operating cash flow for the first quarter of 2023. Cash flow in the first quarter was impacted unfavorably by the timing of sales, as well as the payout of incentive compensation.

We remain focused on working capital efficiency and ended the quarter with 18.5% in controllable working capital. As we mentioned in the February call, we will be consolidating our Juarez facility with activity picking up in the second half of 2023.

During this period, we will build up some buffer stock to facilitate the transition and our goal is to work through that safety stock quickly in 2024. During the first quarter, we repurchased 198,000 shares of CTS stock for approximately $8.9 million. In total, we returned $10 million to shareholders through dividends and buybacks during the quarter.

Sustaining a strong balance sheet continues to be a priority. We had a cash balance of $144 million at the end of March 2023, down from $157 million in December 2022 as we returned cash to shareholders and completed the acquisition of maglab.

Our long-term debt balance was $80 million on our total $400 million facility, down from $84 million at the end of 2022. We remain focused on organic growth and strategic acquisitions, supported by our strong cash position and a healthy balance sheet. This concludes our prepared comments. We would like to open the line for questions at this time..

[Operator Instructions] The first question comes from the line of Justin Long of Stephens..

I wanted to start with a clarification – I just wanted to clarify a comment that you made earlier, Kieran, on the transportation segment outperforming non-transportation in the second quarter. Was that a reference to year-over-year growth or absolute dollars of revenue? Just wanted to get some context there..

Yes. The context, [Justin] [ph], is coming off the first quarter. If you look at – we have the headwinds in certain industrial markets. We have the burn down in distribution, and we expect that to continue. Whereas on the transportation side, we're seeing good growth and we're seeing the resolution of the supply chain issue as well.

Coming into the year, we were a little bit more cautious on transportation. So, we're seeing some uptick there. And we're still trying to figure out the second half of the year. But that's how I would describe it. And obviously, if transportation is stronger, it has a mix impact on our margins as well..

Yes. Justin, in terms of absolute dollars, the transportation end market sales are larger than the rest of our business. And that's what we expect second quarter to be as well..

Okay. So it sounds like that was a reference to the sequential change. You would expect more sequential growth in transportation than non-transportation in the second quarter..

Correct..

That is right, Justin. Yes..

Okay. Got it. I guess thinking about some of the commentary that you had on the second quarter, revenue will be roughly in-line with what we saw in the first quarter. You're going to have some mix headwinds sequentially on the gross margin line.

Is there anything from an operating expense perspective that can offset some of that mix headwind as we move into the second quarter or is it reasonable to expect some EPS pressure sequentially from 1Q to 2Q?.

Justin, I'll start with some color and hand it over to Ashish on the EPS. But I just want to reiterate a little bit that we're also seeing a good performance in medical and defense for the year. So, while we highlighted transportation, we feel good about those two end markets as well.

And then, of course, operationally, we still have some costs that we've made in our comments to take cost to take out as we get adjusted to the lower volume. And as you know, we're going to be very much focused on operational improvements as well.

Ashish, on the EPS?.

Yes. On the surface, Justin, the comments that we made are that there will be some unfavorable mix impact just because of the end market sales, how they are shifting in the short-term. We will be working hard to drive operational efficiency, so looking to offset as much of that mix unfavorability as we can.

On the operating expense side, there was some favorability in the first quarter that are not expecting to repeat. And based on that, we may see a little bit of pressure on the operating expense side as well. So, EPS could be unfavorably impacted compared to Q1..

Got it. And I guess the last question for me is on organic growth. So, it was down roughly 8% in the first quarter. I'm curious when you think that will inflect positively? And maybe you could also comment on the trend in organic growth versus the recent trend in orders, which was pretty strong here in the first quarter.

It feels like there's a discrepancy there. I would love to get your thoughts around that..

So Justin, just as we go forward, when you look at distribution, we're not sure if it's going to be one or two more quarters of burn down in inventory. And we've certainly seen some softness, as we called out, in terms of industrial printing applications with microactuators. That's impacted by China. I know there's a rebound starting in China.

We're carefully monitoring that. Yet we don't see full line of sight. Temperature has been a little bit softer. So that's how we see some of those trends evolving. But I do want to emphasize from an organic growth perspective, we feel – while there's near-term headwinds, we feel very good.

The new pipeline of products that we have coming forward in terms of current sensing, the maglab addition, what we're doing with eBrake, with predevelopment, motor position sensing, and then in terms of therapeutics and diagnostics and expansion that we're doing with new materials in defense and in new regions, we feel pretty good about that.

But there are some short-term headwinds for sure in industrial and in the distribution side..

Okay, thanks. I’ll pass it on and congrats on a good quarter in a tough environment..

Thank you, Justin..

Thank you. The next question comes from John Franzreb of Sidoti. Please proceed..

Good morning, guys and thanks for taking the questions. Kieran, I want to go back to the revenue side here. It seems like there's been a step function change in the industrial market versus three months ago.

Can you just talk to us about what the change was that changed your outlook a little bit to be thinking about the lower half of your midpoint of guidance?.

Yes, John. The first – in industrial, we include our distribution as well. So, there's a softness in distribution from over ordering in the past 12 months. That may take one to two more quarters to burn down that inventory to get orders moving again. And on the flip side, by the way, we're forming new partnerships as we go forward in that area.

Temperature has been a challenge in terms of some of the applications there. Anything that gets kind of somewhat consumer-related or construction-related like HVAC temperature is an area we've seen a slowdown and definitely in industrial printing that was impacted by what we see in the demand coming from that area, particularly for China.

And again, we're seeing some rebounding there, but it's not clear yet. So, we think those headwinds are around for a little bit of time here. But again, we feel better today about transportation than we did several months ago at the last earnings call, and we're doing pretty solid in terms of medical and defense..

So it comes – I mean, I remember you talking about industrial printing last quarter and the consumer last quarter. So, it sounds like the new changes is further weakness in distribution and further weakness or new weakness in construction..

John, what I would say is, if I think back to what we messaged in the last quarter, just to give it context, we said that we expected the first quarter to be the softest quarter of the year. And we see that extending, as you can tell, into the next quarter..

Yes, John, we talked about distribution, could we see pressure in Q1 and Q2. And now our view is that we could potentially see some pressure in the third quarter, as well as inventory levels normalize. But again, a lot remains to be unfolding in the next few months..

Got it. And just to stick on the revenue theme here. You're seeing better demand in transportation.

Is that because China is recovering or are you seeing better demand here in North America than you expected?.

Definitely in North America. China was a little slow to start the year here. And so, we're continuing to watch that. I talked about what we're seeing with the locals and the transplant OEMs. But definitely, John, seeing an uptick from where we were in the January earnings call.

And it looks good, and we're trying to figure out, based on the macroeconomic things we see out there, is the consumer going to stay strong in the second half of the year? I mean, you saw some of the vehicle OEMs giving some strong earnings at this stage. We're just waiting to see how that plays out..

Okay. And Ashish, if I remember correctly, you said there's onetime benefits in the first quarter.

I think you said tax and what – could you just go over that again? What those two expenses were – or benefits were – and where would you find them or identify them in the P&L?.

So there was a $0.02 benefit on tax expense related to equity-based compensation. So that you would see on the tax line. And then on the operating expenses between gross margin and operating earnings, we had about $1 million of favorability that I'm not expecting to repeat as we move forward..

Okay. Got it. Okay. And you know what, I've taken enough time, I'll get back into queue. Thanks guys..

Thanks John..

Thank you. The next question comes from Hendi Susanto of Gabelli Funds. Please proceed..

Good morning, Kieran and Ashish. I think I would like to ask about the timing or the timeline of new product introductions. I think you listed eBrake, Drive-Pad, AC motor, current sensor and an AC motor position sensor.

Can you give us a sense of timing when the revenue ramp-up will take place?.

Yes, it's different for each one of those products, Hendi. Current sensing has already been in development. And actually, we will launch on a European premium vehicle later this year. The eBrake, which we're very excited about, given its benefits in terms of weight and what it can do in terms of system cost, that's in predevelopment with an OEM.

Timing on that, I can't give you exact at the moment, but we would expect to secure a win in the next 12 months. The motor position sensing is still in development, but making good progress there.

We see good opportunity with that because of the complexity of the solution that's out there today and we seem to have a more simplified approach to that, which we think will be successful. And the Drive-Pad is something we've been really testing with customers here in several of the markets. It's been well received.

We are not in predevelopment, but the level of interest in that product and what it can do in the footwell in terms of its design and the flexibility it gives to the OEM with the footwell design and safety is getting a lot of traction and interest, but don't expect revenue on that one until, I don't know, beyond 2027 because of the automotive development period.

But we feel really good about that. And then in the non-transportation markets, you can tell, we're actually bringing new products to the market every quarter here. Obviously, it's smaller impact, but very long runway on those products. And we're very pleased. You saw us into new heart mapping applications this quarter, depth applications.

We're really pleased how we're leveraging the Ferroperm acquisition with new material formulations. So that piece, we feel like we've done a lot of good work in the last 12 months even though it's a tough macroeconomic environment. That's why we feel good about the mid- to long-term..

Okay. And then Ashish, I would like to ask about the impact of the factory consolidation in the form of gross margin pressure. I would like to clarify whether this one is the factory consolidation in Mexico. I think in the past, CTS may have mentioned that it will be completed in like 18 months. I would like to clarify that.

And I'm wondering whether you can share like the rough magnitude of the impact on the gross margin?.

Yes. So, Hendi, we haven't specifically called out the amount of impact. Most of the activity from the plant consolidation in Mexico will be happening between now and the end of the year, and then we will be completing the project in 2024.

My expectation is that the cost burden will be heaviest in the second half of 2023, and we'll call it out at that point in time..

Got it. And then I may have missed this. I think in the prior earnings call, there's a discussion about the impact of component shortages in smart actuators in commercial vehicle market. I think you talked about it, but I would like to review that again.

So, would you rehearse that one more time?.

Yes, Hendi. The shortage – that shortage has been resolved. We're back running where we need to be running. Obviously, we continue to watch for shortages out there because while we see that passive components have improved, semiconductors are still something to be watched, but we're back.

And as we said, the demand in the commercial vehicle market in the first half of the year looks very solid..

Got it. Thank you Ashish. Thank you Kieran..

Thank you, Hendi..

The next question comes from Joshua Buchalter of TD Cowen. Please proceed..

Hey guys. Congrats on the resilient results in a tough backdrop. I wanted to ask about the transportation market again.

So, I guess if we isolate the fact that the semi shortage is sort of behind us, is there any sort of catch-up baked into your outlook for the fiscal year or is it just we're now shipping towards – or closer to [indiscernible] demand? I'm trying to understand like where inventory levels are downstream within your transportation vertical? Thank you..

Josh, the semiconductor problem, as Kieran talked about was resolved in the first quarter. We were able to pick up pace on those shipments towards the third month of the quarter, and we expect that to be good momentum moving forward.

In terms of timing of revenues, I think we talked about in some of our prior earnings calls that the customers have been managing in terms of how they balance between supplying to OEMs versus supplying to aftermarket. So, there may be some pickup in the next few months from that.

But I would expect us to see more normal levels and be more driven by what's happening in the end market demand, which at this point in time, in the commercial vehicle space, as Kieran mentioned, we are seeing a pretty robust demand at the moment..

Got it. And then I wanted to ask about gross margins. If I put the puts and takes together, it sounds like current levels are sort of the right way to think about things unless there's a change in FX or your cost basis.

I guess on the flip side, how do you feel about your like-for-like pricing? It sounds like your customers are willing to share some of the increased input costs, but I'd be curious on how we should be thinking about the gross margin trajectory from here through the rest of the year? Thank you..

So, Josh, going back to the pricing first. Those discussions continue to get more challenging. There's no doubt about that. The first time it's a hard discussion and then the second and third time, it continues getting harder. We are working through those.

Our teams are doing a good job of having those discussions with our customers and finding the appropriate path forward. We are continuing to monitor carefully if we see the trend reversing on that at some point, which we haven't seen yet.

And as we mentioned in our comments, we are actually still seeing some inflationary pressures in different parts of our business. So, that's something we'll have to continue monitoring as we move forward.

On the gross margin, we did talk about a little bit of an unfavorable mix impact just as we see stronger transportation sales and some softness on the industrial side of the business. My expectation is, could that continue for the next – definitely in the second quarter, I'm expecting some unfavorable impact.

And then we need to monitor how the second half of the year evolves as we work through those different demand environments..

Okay. And then last one for me. Within the mix of non-transport, could you remind us are Aerospace and Defense and Medical materially different than in the Industrial segment from a margin perspective? Thanks, and I'll hop back in the queue..

Yes. They tend to be higher margin products in medical and defense..

Yes. Josh, just to clarify Kieran's comments, they are higher than the rest of our business. The industrial, it's a little bit of a mixed bag. There are some parts of it where we have higher margins, some parts of it where we have to be more competitive based on distribution channels may not be quite as rich as some of our custom engineered solutions..

Got it, thank you..

Thank you. And our final question is a follow-up from John Franzreb of Sidoti. Please proceed..

Just on the EV growth outlook. I believe you finished 2022 with something around 8% to 9% volume.

What is your thoughts about the targets for where you're going to be in EV by the end of this year?.

John, I think if you look at it, the penetration rate is out there. If you look at China, it's probably trending more towards 30% in total over time, Europe is trending more like 15%, 7% for North America. So, we're in the double digits, but we haven't gotten to our goal yet. So, we're trending in the right direction.

And we feel pretty confident that we're on target for what we're trying to achieve by 2025. But we've got a good pipeline of quotes. You can see our wins in the first quarter still very robust in transportation, and we think this is going to be a year to continue to build momentum..

Did you just say you already are in double digits at this point?.

Yes. But we didn't – I said we're in double digits, but in terms of momentum, we're not going to hit the 25% until 2025 that directionally..

I recognize that. I'm just trying to see what the slope of this growth is, kind of looking like.

Is it all back ended or how much momentum we could see in 2023?.

I think you're going to see good momentum this year, John, from the products we have and the momentum we're taking because remember, it's some of it's on new products, we're winning on existing products in the portfolio as well and have been for some time..

Got it.

And just on the total transportation portfolio, what kind of visibility you have for the balance of the year? Do you have it through the third quarter, through year-end? Can you just give us some color there?.

John, it's – we've got decent visibility going out three months from now. Beyond that, we – even though we have some visibility, we're just being a little bit cautious in terms of end demand and the consumer confidence.

If you look at some of the backlogs in commercial vehicle, they would indicate a strengthening beyond the first half of the year, but we want to really see how demand develops. That's why we said in terms of guidance, we want to give a better update because we'll have more insight into the second half in the next earnings call..

Fair enough. Thanks, Kieran, I appreciate it..

You’re welcome, John..

Thank you. And with that, we will conclude our time of question-and-answer. I would now like to pass the call back over to Mr. O'Sullivan for closing remarks..

Thank you, Daniel, and thank you all for your time. CTS is well-positioned for future growth driven by market demand for increased automation, connectivity, and energy efficiency. Our strategic focus on diversification, electrification, and mobility and channel development enhances profitable portfolio.

I want to thank our global teams for their ongoing focus on operational execution in a difficult environment and their support in driving our strategic initiatives.

With the support of our dedicated teams whose deep expertise and custom engineered solution capabilities fuel growth across our customer base, we will continue to deliver sustained long-term value for our stakeholders. Thank you for joining our call today. This concludes the call..

That concludes today's call. Thank you for participating. You may now disconnect your lines..