CTS Corporation (NYSE: NYSE:CTS) reported a decrease in sales for the first quarter of 2024, with total revenue reaching $126 million, marking a 14% drop from the previous year. The dip was seen across both transportation and non-transportation sectors, with a sharper decline in non-transportation sales.
Despite this, the company saw positive booking trends and stable performance in the medical market, with expectations of a stronger second half of the year. CTS's guidance for the full year includes sales projections between $530 million to $570 million and adjusted diluted earnings per share from $2.10 to $2.35.
Key Takeaways
- Q1 sales fell by 14% year-over-year to $126 million.
- Non-transportation sales decreased by 17%, while transportation sales saw a 10% decline.
- Improved booking trends in non-transportation markets; medical market remained stable.
- Defense sales dropped due to timing but are expected to gain momentum.
- The company plans to grow its customer base in industrial, medical, and defense markets.
- Adjusted gross margin improved to 36.2%, reflecting better customer mix and manufacturing efficiencies.
- Operating expenses rose by 4% after restoring temporary cost reductions.
- Q1 earnings per diluted share were $0.36, with adjusted earnings at $0.47.
- The company repurchased 272,000 shares for approximately $12 million.
Company Outlook
- CTS anticipates a potential recovery and stronger performance in the latter half of 2024.
- Full-year guidance includes sales ranging from $530 million to $570 million.
- Adjusted EPS forecasted to be between $2.10 and $2.35.
Bearish Highlights
- Sales declines in both transportation and non-transportation sectors.
- Pricing pressure across all transportation markets expected to intensify.
- Industrial sector performance identified as a current headwind.
Bullish Highlights
- Positive booking trends in non-transportation and stability in the medical market.
- Defense sector expected to gain momentum throughout the year.
- Focus on future growth driven by megatrends in automation, connectivity, energy efficiency, and medical innovation.
Misses
- Overall sales fell short compared to the same period in the previous year.
- Decline in defense sales attributed to timing rather than a downturn in demand.
Q&A Highlights
- CTS Corporation is not overly concerned about non-transportation market conditions.
- Medical and defense markets are performing well, with strong bookings and expected momentum.
- Capital spending is set to remain around 4% of sales for 2024 and beyond.
- The company seeks to win back market shares while acknowledging OEM preferences for second source flexibility.
- CTS is cautious about expanding in the Chinese market due to vertical integration by local OEMs but is targeting specific opportunities.
- Pricing pressure in the transportation market has been incorporated into their guidance, with a focus on internal productivity to improve margins.
During the earnings call, Kieran O'Sullivan, a representative from CTS Corporation, highlighted the company's strategic focus on innovation, quality, and on-time delivery to recover market share in the transportation industry. The company is also implementing strategies to carefully expand its presence among local Chinese OEMs, targeting specific markets and opportunities. New product developments in motor position sensing and e-break applications are part of the company's efforts to combat pricing pressures and preserve profit margins. Despite current market softness and near-term challenges, CTS Corporation remains committed to leveraging megatrends to drive future growth.
InvestingPro Insights
CTS Corporation (NYSE: CTS) has demonstrated resilience in light of recent sales challenges, underpinned by a strong balance sheet and a strategic approach to share repurchases. Here are some insights based on the latest data from InvestingPro:
- The company's market capitalization stands at $1.46 billion, showcasing a considerable size within its industry.
- With a P/E ratio of 24.66, CTS is trading at a premium relative to its near-term earnings growth, which is an important consideration for investors looking at current valuation.
- CTS's robust gross profit margin of 34.67% for the last twelve months as of Q4 2023 indicates a strong ability to manage cost of goods sold and maintain profitability.
InvestingPro Tips highlight several key aspects of the company's financial health and market performance:
1. CTS has been actively engaging in share buybacks, a sign that management is confident in the company's intrinsic value and future prospects.
2. The company's ability to maintain dividend payments for over five decades is a testament to its financial stability and commitment to shareholder returns.
For those seeking to delve deeper into CTS Corporation's financials and market performance, InvestingPro offers additional insights. Currently, there are 7 more InvestingPro Tips available, providing a comprehensive analysis of the company's financial health and stock performance. To access these insights and enhance your investment strategy, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - CTS Corp (CTS) Q1 2024:
Operator: Hello all, and welcome to CTS Corporation's First Quarter 2024 Conference Call. My name is Lydia, and I'll be your operator today's. All lines have been placed on mute to prevent any background noise and after the prepared remarks, there will be an opportunity to ask questions. [Operator Instructions] I'll now hand you over to Kieran O'Sullivan, CEO, to begin. Please go ahead.
Kieran O’Sullivan: Thank you, Lydia. Good morning, and thank you for joining our first quarter 2024 earnings call. Sales were in line with our expectations for the quarter, as non-transportation sales started to stabilize from the ongoing reduction in customer inventory. In the quarter, we also saw an improved booking trend for non-transportation markets. Sales to commercial vehicle markets declined as expected, driven by softer demand and a more competitive environment. Light vehicle sales were stable across most regions, except in China, where our sales to transplant OEMs were softer. While defense sales were lower, due primarily to the timing of shipments, we expect good momentum for the rest of 2024. Across medical, we saw solid performance. Ashish, our CFO, will 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 with today’s earnings press release and supplemental slide presentation, which can be found in the Investors section of the CTS website. I'll now turn the discussion back over to our CEO, Kieran O'Sullivan.
Kieran O’Sullivan: Thanks, Ashish. We finished the first quarter with sales of $126 million, a decline of 14% from the first quarter of 2023. For the quarter, non-transportation sales were down 17% and transportation sales were down 10% from the same period last year. Sequentially, non-transportation sales were up 7%, as we see some early signs of recovery in the industrial end market. Sales to the transportation end market were down 4% versus the fourth quarter of 2023. I want to thank our teams for their support, as we carefully manage the operations while we navigate a challenging revenue environment. Our book-to-bill ratio was 1.07 in the first quarter, up from 0.96 in the first quarter and the fourth quarter of 2023. The improvement in the book-to-bill ratio is in line with our expectations of recovery in the industrial end market with both distribution and OEM customers. We are encouraged by these early signs. However, inventories are still correcting, and we will continue to monitor the order intake carefully. Adjusted gross margin in the first quarter was 36.2%, up 86 basis points from the first quarter of 2023, driven by operational improvements and the mix shift to non-transportation sales. On the operations front, our teams worked on improvements to help offset the unfavorable impacts from lower volumes. We are still experiencing some cost pressures, especially for certain materials and from labor cost increases. We expect pricing pressure this year, particularly in transportation markets. We remain confident in our ability to drive efficiencies in our supply chain and manufacturing sites and to improve our operational performance and profitability. We also met significant progress on the consolidation of the Juarez facility into the Matamoros site in Mexico and expect to fully exit the Juarez location in the second quarter. This has been a tremendous effort by our teams to advance this project while successfully supporting our customers. First quarter adjusted diluted earnings per share of $0.47, we're down from $0.61 in the same period last year. Later Ashish will add further color on our financial performance. Non-transportation sales decreased 17% in the first quarter compared to the prior year period, but we're up 7% sequentially. The book to bill ratio was above 1 and new order trends were positive across several product lines. In medical markets, sales were essentially flat from the same period in 2023, but bookings were up sequentially as well as from the same period last year. We are seeing steady demand and expect further growth in 2024. We had multiple wins in the quarter for diagnostic ultrasound across all regions and secured a new order for an intravascular ultrasound application. We were engaged on two new programs for applications in blood analysis and therapeutic ultrasound. Additionally, we added two new customers, one for facial therapeutics and a second for a disposable blood analyzer. In the quarter, we also partnered with an existing customer on an advanced development project that has the potential to expand our intravascular applications by leveraging the capabilities of our single crystal technology. We expect the long-term prospects for the aerospace and defense end market to be solid given our enhanced capabilities and material formulations. Aerospace and defense sales were down in the quarter primarily due to the timing of shipments to some customers. Bookings were strong in the quarter as we received multiple orders for hydrophones, sonobuoys, underwater unmanned applications, frequency controls and RF filters. We added three new programs in the quarter for AUVs and satellite RF filter applications. We also added one new customer for an application in aerospace and defense non-destructive testing. Additionally, we are getting traction on European defense growth with sample qualifications in progress and we anticipate sales growth in 2025 on a multi-year opportunity. In the industrial market, overall sales were down from the prior year period. Sales and bookings were up sequentially. We were successful with several sales wins in the quarter including for industrial printing, EMC (NYSE:EMC_old) components, temperature sensing, flow metering and switches. We added three new customers in the quarter for temperature and EMC applications. While we saw a small sequential improvement in distribution sales and bookings, inventory reduction is still in progress. Looking ahead for the year in non-transportation end markets, we expect improvement in our industrial and distribution end market revenue in the second half of 2024. For defense and medical markets, we anticipate a stable environment and we expect to make solid progress on the qualification of products for prospective new customers. 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. 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. Transportation sales were $66.5 million in the first quarter, down approximately 10% from the same period last year and down 4% sequentially. We are experiencing a softer demand softer demand environment for commercial vehicle products in 2024, driven primarily by market softness and second source competition. 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. The 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. In the first quarter, we had wins across various product groups, including accelerometer modules, [indiscernible] sensors, and passive safety sensors. We added a new EV customer in North America and are progressing on advanced development awards with other new customers for accelerator modules and EV bus bar applications for current sensing. Total booked business was approximately $1.2 billion at the end of the quarter. As we look to our future, we are excited by the opportunity the transition to electrification offers us even as penetration rates adjust near-term. We continue to see the foot well in the vehicle as a space where we expect to expand our product offering with traditional accelerator modules, haptic modules, new e-brake products offering weight and cost advantages, and the future introduction of our Drive-Pad technology, a low-travel pedal product. We expect these and other sensor applications will increase our ability to grow content with a potential SAM of greater than $1 billion. 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 approaching normalized levels of 3 million units. European production is forecasted in the 17 million unit range. China volumes are expected in the 28 million unit range. Electric vehicle penetration rates have softened in most regions, while hybrid adoption has improved. Overall, we anticipate a slightly down market for light vehicle production due to the China market dynamics. We expect softness in commercial vehicle related revenue throughout 2024, primarily due to lower demand as well as the second source competition. For the non-transportation markets, in line with our diversification strategy, we aim to expand the customer base and range of applications in the industrial, medical, and defense end markets. The green shoots we mentioned last quarter in the form of inventory level corrections and improved bookings are slowly becoming apparent and are indicators of a potential recovery in the second half of 2024. As we outlined in our last earnings call, we expect a soft first half and continued near-term challenges in transportation sales, while we see strengthening in non-transportation sales and an improved margin profile. Demand in defense and medical markets is expected to remain solid as industrial and distribution begins to demonstrate early signs of an improving threat. Our balance sheet is strong with ample liquidity, supported by strong cash generation, which enables us to focus on strategic acquisitions and returning cash to shareholders. In terms of guidance for full year 2024, we are maintaining our prior guidance and anticipate sales in the range of $530 million to $570 million and adjusted diluted earnings per share in the range of $2.10 to $2.35. Now, I'll turn it over to Ashish, who will walk us through the financial results in more detail. Ashish?
Ashish Agrawal: Thank you, Kieran. First quarter sales were $126 million, down 14% compared to the first quarter of 2023 and up 1% sequentially from the fourth quarter of 2023. Sales to transportation customers were down 10% from the first quarter of last year, due primarily to the softness in sales related to commercial vehicle products and sales to our light vehicle customers in China. Sequentially, sales to the transportation market were down 4% compared to the fourth quarter of 2023. Sales to non-transportation end markets decreased 17% year-over-year, driven mainly by continued softness in the industrial and distribution end markets. Compared to the fourth quarter of 2023, sales to non-transportation customers increased 7% as we saw some improvement in sales to industrial OEM customers. Sales to the medical end market were stable. And although, we saw lower sales in the aerospace and defense end market in the first quarter, we expect to have strong momentum in both these end markets in 2024. Our adjusted gross margin was 36.2% in the first quarter, up 86 basis points compared to the first quarter of 2023 and up 205 basis points compared to the fourth quarter of 2023. The improvements were driven by a favorable change in customer mix as well as efficiency improvements in our manufacturing operations. As Kieran highlighted, we made good progress on our project to transition production from the Juarez location to our site in Matamoros. We expect completion of the transition in the second quarter of 2024. As we navigate the challenging revenue environment, we reduced operating expenses in the fourth quarter of 2023 through temporary cost reduction measures and released reserves related to incentive compensation. We restored these temporary cost measures in the first quarter of 2024. As a result, we saw an increase of approximately 4% of sales in our operating expenses. Our objective is to ensure we manage operating expenses appropriately considering both the market environment and the focus to balance funding investments in programs that will drive future revenue growth for our company. During the first quarter of 2024, we benefited from some discrete tax-related items, and as a result, had an improved tax rate of 18.6%. For 2024, overall, we expect our tax rate to be in the range of 19% to 22%. Earnings per diluted share were $0.36 in the first quarter. Adjusted earnings for the first quarter were $0.47 per diluted share compared to $0.61 per diluted share for the first quarter of last year. Moving on to cash generation and the balance sheet. We generated $18 million in operating cash flow in the first quarter of 2024 compared to $11 million in the first quarter of 2023. Our balance sheet remains strong with a cash balance of $162 million as of March 31, 2024, and the long-term debt balance was $68 million. During the quarter, we repurchased approximately 272,000 shares of CTS stock totaling approximately $12 million. We remain focused on strong cash generation and are committed to maintaining a healthy balance sheet to continue to support organic growth, strategic acquisitions and returning cash to shareholders. This concludes our prepared comments. We would like to open the line for questions at this time.
Operator: Thank you. [Operator Instructions] Our first question today comes from Josh Buchalter of TD Cowen. Your line is open. Please go ahead.
Unidentified Analyst: Hi. Good morning guys. This is Sam on for Josh. It's good to see a positive book-to-bill for the non-transport side of the business. And I was wondering, based on your comments, it sounds like medical and A&D bookings are solid. But is your non-transport book-to-bill mostly driven, like entirely driven by industrial. And then, where do the total bookings stand this quarter versus 2023s exiting at $1.36 billion. Was the $1.2 billion just for transportation?
Ashish Agrawal: Yes. The book business is back in the transportation area, back to your book-to-bill and the trend here. The industrial being a larger part of the overall revenue is improving sequentially by double digits. We also saw improvements in medical. And in all areas, we saw an increased book-to-bill. On the defense side of it, we had some timing of ship and some of those orders come in a little bit lumpy. But I would tell you, the book-to-bill was very strong, and that's why we feel good about that for the full year period as well.
Kieran O’Sullivan: Yes. Sam, on your question on the total book business, we did reflect in that number. That reflects our long-term revenue expectation for the transportation part of our business. And we reflected adjustments related to the expectation of lower revenue because of the second source in the commercial vehicle products and also a smaller adjustment for the China OEM sales softness that we talked about just a moment ago.
Unidentified Analyst: Understood. Thank you. And then I think last quarter, I asked you all the progress of the burn down of the inventory in the distribution channel. And I think you mentioned -- or you noted that peers were talking about 60% or 70% burn down at the time, and it sounds like we're still working through that. Do you have any kind of update directionally on that and how long that might take to clear the channel.
Ashish Agrawal: Sam, probably the best way of describing it is, we're seeing inventories continue to burn down. For the first time, I would say, in the last few quarters with our customers, their POS numbers have improved, and we've seen a small improvement in our bookings and also in our sales. So trending in the right direction, but just being very cautious here at the moment. And remember, it's about 10% of our overall sales.
Unidentified Analyst: Loud and clear. Thanks guys. And last one for me. I think it's pretty well known that you're seeing a little bit of a shift from full BEV to hybrid. And I was just wondering, is that comment -- are you seeing that more in non-Chinese markets in the China market, the BEV market in China is still doing well in status quo versus 6 months ago? Or can you break that down for us to kind of give us the geographical split on what you're seeing?
Kieran O’Sullivan: Yes. Sam, I’ll say on the BEV overall is North American, we have softened a little bit. Europe has gone a little bit flattish. I'm thinking North America in the 7% range, maybe a little less, Europe more in the low double digits. China has been higher and China was lower in the first quarter. But remember, you've got the Chinese New Year. So I think that will correct itself overall. I think we're not so much worried about that because of the products are mostly agnostic. It does have some impact on us as we call that, the thing that concerns us is our transplant customers losing share in China. That's where we're mostly focused.
Unidentified Analyst: Understood. Thank you, gentlemen. I'll hop back in the queue.
Kieran O’Sullivan: Thanks.
Operator: Our next question comes from Justin Long of Stephens. Please go ahead.
Justin Long: Thanks and good morning. Maybe to start with a question on the guidance, it sounds like the improvement you're expecting in industrial is more weighted towards the second half. So as we think about the cadence of both revenue and earnings over the rest of the year, does the guidance assume that the second quarter looks similar to the first and then we pick up in the back half? Or is there any more color you can provide around the progression of the business over the next three quarters?
Kieran O’Sullivan: Yeah, I would say, just to give an overall context on it, transportation because of the commercial side of it, light vehicle in Asia is going to be a little bit of a challenge all year, but that's factored in. The improvement, you'll see some improvement in the second quarter, but most of it in the back half. But you definitely will see some improvement in the second quarter, Justin.
Justin Long: Okay. That’s helpful.
Ashish Agrawal: Justin, just to add to that as we have previously communicated, we expect softer second half for transportation and the recovery in the industrial business. So the mix should continue shifting towards the non-transportation revenue in the second half of the year.
Justin Long: Okay. And I guess on that point, Ashish, we did see about a 200 basis point improvement in gross margin, adjusted gross margin sequentially in the first quarter. How much of that was just a function of better product mix versus some of the operational improvements that you discussed? And can you help us think about just the sustainability of this gross margin level going forward?
Ashish Agrawal: Yeah. So Justin, without going into too much detail there, we do see some improvement from -- operational improvements as well as the customer mix. What I would tell you is that as we see the mix shift continuing to change as we go through the rest of the year, we do expect more favorable impact. And, obviously, we'll continue focusing on operational efficiency at the same time as well.
Justin Long: Okay. Got it. And I guess the last one for me was around the competition from a second source and commercial vehicle. I'm just curious, is that new development? Is that something that you anticipated coming into this year when you initially gave guidance? And is there any more color you can provide on what the headwind from that could look like as we try to understand, how much of the pressure is coming from the market and lower production versus issues with the second competitor.
Kieran O’Sullivan: Yes. So Justin, it's a newer development. As you know, in commercial vehicle markets, it's -- or even automotive light vehicle, it's not unusual to have second source. We're ready for that. And if we look at the nature of the product, the relationship we have with the customer, we think we're going to have good business there going forward. And then to your question on the run rate, has the softness been built in. Yes, the softness is built in, but we anticipate some more softness in the second half of the year. So obviously, we've got to compete. We've got to do a good job in innovation and quality, and that's what we do in all our other markets as well. So that's probably the best way of describing it overall.
Ashish Agrawal: Yes. Justin, just to reiterate, when we put the guide out for the year, this was anticipated in the range of our sales expectations. So from that perspective, it's not new, but as Kieran said, it is a newer development that we were pulling in on in early part of 2024.
Justin Long: Okay. That's helpful to clarify. I think that's it for me. Thank you so much for the time.
Kieran O’Sullivan: Thank you, Justin.
Ashish Agrawal: Thanks, Justin.
Operator: The next question comes from John Franzreb of Sidoti & Company. Please go ahead.
John Franzreb: Yes. Just sticking to the topic of pricing pressure, is it limited to the second source competition? Or are you seeing it in other end markets as well?
Kieran O’Sullivan: John, it's primarily across all transportation markets. We would look at it that way, not just the commercial. It's all transportation. We expect from the changes in the last few years. What's happened with the Troy Tree and Union negotiations and different things that are happening? Bugle prices will start to drop a little bit not completely yet, but we expect that pressure to build in the transportation market. We're not as concerned about the non-transportation market.
John Franzreb: Understood. And in the non-transportation markets, you alluded to the fact that you expect the second half to be better than the first half based on current bookings profiles, which end market within the non-transportation businesses is probably going to be the first to recover in 2024?
Kieran O’Sullivan: John, the way I'd frame that a little bit is, we've been -- if you look at the non-transportation, medical and defense have been doing steady all last year, this year as well, and we expect them to perform. Industrial has been the big headwind, and we've seen sequential improvement in sales and bookings, and that's where we expect the biggest improvement going into the second half.
Ashish Agrawal: And John, Kieran also talked about strong bookings in medical as well as aerospace and defense in the first quarter. So we expect that momentum in medical and aerospace and defense to continue in 2024.
John Franzreb: Understood. And just to ask, given the relocation of the facility, any update on capital spending for the year what the budget looks like?
Ashish Agrawal: So John, we typically talk about 4% of sales. Some years, it's a little less. Some years, we have been a little higher. That feels about right for us as we look at 2024 and beyond.
John Franzreb: Okay, guys. Thank you. I’ll get back in the queue.
Ashish Agrawal: Great. Thank you.
Operator: Thank you. [Operator Instructions] Our next question comes from Hendi Susanto of Gabelli Funds. Please go ahead. Your line is open.
Hendi Susanto: Good morning, Kieran and Ashish.
Kieran O’Sullivan: Good morning, Hendi.
Hendi Susanto: Kieran, I would like to ask further questions on the second source competitions. In terms of, let's say, like the timing of winning or losing shares? Are there some timing elements, meaning that when will CTS or your customers can regain shares back with regard to the second source competition?
Kieran O’Sullivan: So Hendi, I think two things there. I mentioned that from the sales drop is already in our run rate, but we will see some further drop due to market softness in the second half of the year. So probably that's the best way to characterize your question. And as you know, in transportation, not unusual to have second source. So we've got to make sure we're doing a good job in innovation, quality, on-time delivery, just like we do with 20 other OEMs we do business with in transportation.
Hendi Susanto: And then in terms of like winning it back, can it happen any time?
Kieran O’Sullivan: I understand your question.
Hendi Susanto: Yes.
Kieran O’Sullivan: And we always aim to win. And I would tell you, though, in most OEM situations, they always like to have some second source capability. And sure will we fight for more share? Absolutely. That's what we're here for. But I would expect an OEM to maintain some flexibility.
Hendi Susanto: Okay. And even in the life cycle markets, Chinese OEMs winning against transplant. What is the current strategy or current plans to expand your presence among the local Chinese OEMs? Like where are we now? And then what should we envision for the next several quarters?
Ashish Agrawal: Andy, that's a good question. Thank you. It's a tough one because with some OEMs in China, we know we can expand, not just over in that region, but as they expand globally as well. On the other hand, there are some we probably won't play with because they tend to do a lot of vertical integration versus taking your technology over time. So we're very careful where we play. And then the other thing we've been doing is because, as you know, the cycle there, if you lose a few million in revenue, it takes a few years to gain it back. But we've already been working on this. As I mentioned in the last -- one of the last few earnings calls, we had wins on accelerometers. So doing that with new products and what we're doing with current sensing, those types of products are needed in the market so we can win in the market with that in motor position sensing and e-break applications. So that's where we're doubling down.
Hendi Susanto: Got it. And then -- with regard to the pricing pressure in transportation, may I verify whether that has been factored in within your guidance?
Ashish Agrawal: Yes, we always factored that within our guidance, Hendi. And obviously, we're driving productivity internally to make sure we're improving and doing the right things to preserve and improve our margin profile as well.
Hendi Susanto: Thank you, Kieran. Thank you, Ashish.
Ashish Agrawal: Thanks, Hendi.
Kieran O’Sullivan: Thank you, Hendi.
Operator: Thank you. [Operator Instructions] We have no further questions. So I'll turn the call back over to Kieran O'Sullivan for any closing comments.
Kieran O’Sullivan: Thank you, Lydia and thank you, everyone for your time. Despite the near-term headwinds, CTS is 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. Thank you for joining us today on the call. This concludes our call.
Operator: This concludes today's call. Thank you very much for joining. You may now disconnect your lines.
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