Executive Summary

Q4 2024 revenue was $127.4M (+2% YoY) with diversified end-markets at 56% of mix and transportation down 18% YoY; adjusted gross margin expanded 394 bps to 38.1% and adjusted EPS rose to $0.53 (+14% YoY) .
Transportation revenue softness (China and commercial vehicles) was offset by strength in medical, industrial, and aero/defense; SyQwest contributed ~$11M of Q4 revenue and is accretive to margin (EPS accretive in 2H25 per management) .
FY2025 guidance introduced: revenue $520–$550M and adjusted diluted EPS $2.20–$2.35; tax rate 19–21% ex-discrete items; seasonality expected for SyQwest with stronger 2H25 .
Cash generation remained solid (Q4 operating cash flow $26.0M; FCF $19.9M) and capital returns continued (Q4 buybacks ~$8M; $0.04 dividend declared for April 2025) .
Near-term stock drivers: diversified margin trajectory and defense pipeline; watch transportation trajectory (China/commercial vehicles) and tariff headlines; management expects Q1 2025 flat to marginally up, stronger 2H on SyQwest timing .

What Went Well and What Went Wrong

What Went Well

Diversification progress: diversified end-markets revenue up 28% YoY in Q4; mix improved to 56% in Q4 and 51% for FY24. CEO: “We continued diversifying our business… now represent more than 50% of our revenue.” .
Margin expansion despite a challenging environment: adjusted gross margin 38.1% in Q4 (+394 bps YoY), aided by mix, operational improvements, and ~$1.5M FX tailwind; adjusted EBITDA margin 23.9% .
Defense momentum: SyQwest added ~$11M in Q4 and $14M in FY24; multiple sonar and RF filter wins; management targeting move “from a component supplier to… sensors, transducers and subsystems” .

What Went Wrong

Transportation weakness: Q4 transportation revenue $57M (-18% YoY); softness in China (transplant OEM share loss) and commercial vehicle competition; 2025 expected to be soft in commercial vehicles .
Sequential revenue down vs Q3: Q4 sales $127.4M vs Q3 $132.4M (-3.8% QoQ); adjusted gross margin down 50 bps QoQ to 38.1% (still up YoY) .
Operating cash flow down YoY in Q4 ($26.0M vs $32.1M) as working capital normalized; free cash flow $19.9M vs $28.6M prior year .

Financial Results

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue ($USD Millions)	$130.2	$132.4	$127.4
Diluted EPS ($USD)	$0.48	$0.61	$0.45
Adjusted EPS ($USD)	$0.54	$0.63	$0.53
Adjusted Gross Margin %	35.8%	38.6%	38.1%
Adjusted EBITDA Margin %	21.7%	24.8%	23.9%
Operating Cash Flow ($USD Millions)	$19.6	$35.4	$26.0

Segment/end-market breakdown (Q4 2024):

End-Market	Revenue ($USD Millions)	Mix (%)	YoY Change
Transportation	$57.0	44.7% (calc from total/mix)	-18%
Diversified (Industrial, Aerospace & Defense, Medical)	$71.3 (56% of $127.4M)	56.0%	+28%

KPIs and balance sheet (quarter/fy context):

KPI	Q3 2024	Q4 2024	FY 2024
Book-to-bill ratio	1.00	0.96 (Q4; call)	1.01
Free Cash Flow ($USD Millions)	$31.5	$19.9	$80.6
Capex ($USD Millions)	$3.9	$6.1	$18.6
Cash and Equivalents ($USD Millions)	$94.9	$94.3	$94.3
Total Debt ($USD Millions)	$102.7	$91.3	$91.3
Share repurchases (Q4)	—	~$8M; ~154k shares	$43M buybacks; $48M total returns

Note: Diversified revenue figure is derived from reported mix and total revenue; transportation revenue is reported directly.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Millions)	FY 2025	—	$520–$550	New
Adjusted Diluted EPS ($USD)	FY 2025	—	$2.20–$2.35	New
Tax Rate (ex-discrete)	FY 2025	—	19–21%	New
Revenue ($USD Millions)	FY 2024	$515–$525 (updated in Q3)	Actual $515.8	Within range
Adjusted Diluted EPS ($USD)	FY 2024	$2.05–$2.25	Actual $2.17	Within range
Dividend per share	Next payment	—	$0.04 payable Apr 25, 2025	Declared

Management also expects SyQwest revenue seasonality with stronger 2H 2025 .

Earnings Call Themes & Trends

Topic	Q2 2024 (Prior-2)	Q3 2024 (Prior-1)	Q4 2024 (Current)	Trend
Diversification/mix	Non-transport up 11% seq; 51% of rev	Diversified ~52% of rev; up 18% YoY	Diversified 56% of rev; up 28% YoY	Improving mix; margin accretive
Transportation (China/commercial vehicles)	Softness; China share loss; CV down; Q2 transport -22% YoY	Transport down 17% YoY; delays in OEM sourcing	Q4 transport $57M (-18% YoY); 2025 soft CV; China dynamics persist	Ongoing headwind
Defense/SyQwest	Acquisition announced; $10–$14M FY24 contribution expected	Strong YoY growth; accretive margin; EPS dilutive 2024; accretive 2H25	~$11M Q4 revenue; stronger 2H25; integration on track	Positive; seasonal
Industrial recovery	Gradual recovery; bookings mixed; sequential +4%	Gradual recovery; Q3 sales +2% seq, +26% YoY	Normalized inventories; expect gradual rebuilding in 2025	Gradual improvement
Medical performance	Wins in therapeutics/ultrasound; sequential +6%	Q4 expected softness; overall growth into next year	Q4 sequential softness; strong bookings; portable ultrasound growth	Long-term growth; near-term inventory adjustment
FX/margins	Q2 adjusted GM 35.8%; pricing pressure manageable	Adjusted GM +416 bps YoY; FX benefit ~$1.5M	Adjusted GM +394 bps YoY; FX benefit ~$1.5M	Margin tailwinds sustain

Management Commentary

CEO: “We continued diversifying our business… now represent more than 50% of our revenue. We also delivered solid profitability improvements and strong cash flow in a challenging operating environment.” .
Strategy: “Moving from a component supplier to a supplier of sensors, transducers and subsystems… expand our product range and market opportunity after a period of integration.” .
Transportation outlook: “Overall, we anticipate headwinds in our transportation revenue due to the China market dynamics and other regional factors… softness in commercial vehicle revenue throughout 2025.” .
Q1 cadence and SyQwest seasonality: “We expect the first quarter to be flat to marginally up… SyQwest revenue tends to be heavier in the second half.” .

Q&A Highlights

Tariffs and supply chain: Management is proactively working with customers/suppliers to mitigate tariffs; monitoring Mexico/China/Europe exposure .
Guidance composition: Expect low-single-digit declines in transportation and high-single-digit growth in diversified markets; Q1 flat to marginally up; stronger 2H from SyQwest .
Industrial recovery: Inventories normalized; expecting gradual improvement; tempered sequential trends despite strong YoY growth .
eBrake trajectory: Pre-development award with premium European OEM; initial revenue timing discussed as 2027–2028 with first-year $5–$10M potential; adoption primarily in light vehicles .
Capital returns and liquidity: $94M cash, $91M debt at year-end; Q4 repurchases ~$8M; $48M returned in 2024; $61M remaining under buyback program .

Estimates Context

Wall Street consensus comparisons for Q4 2024 EPS and revenue could not be retrieved from S&P Global due to request limits; therefore, beat/miss vs estimates is unavailable in this report. Analysts are likely to calibrate 2025 models to management guidance (revenue $520–$550M; adjusted EPS $2.20–$2.35), incorporate sustained diversified margin tailwinds and transportation softness, and reflect SyQwest 2H seasonality .

Key Takeaways for Investors

Diversification is working: mix shift to medical/industrial/aero-defense is structurally accretive to margins; adjusted gross margin expanded materially YoY again in Q4 .
Defense pipeline/SyQwest is a 2025 catalyst: expect revenue weighting to 2H25 and EPS accretion as integration progresses; watch funding approval timing .
Transportation remains a drag: China and commercial vehicles are the key headwinds; model low-single-digit declines in transport for 2025 per management .
Margin trajectory: FX and operational improvements supported Q4 margins; continued mix shift should sustain mid-high 30s adjusted GM in 2025; monitor pricing pressure in China .
Cash generation and returns: solid OCF/FCF enable ongoing buybacks/dividend ($0.04 declared), while maintaining dry powder for M&A .
Near-term setup: management guided Q1 2025 flat to marginally up; expect stronger 2H on SyQwest and industrial recovery; stock may be sensitive to tariff headlines and transportation datapoints .
Watch the eBrake narrative: design wins and content expansion can enhance long-term transportation content irrespective of powertrain mix; revenue ramp is post-2026 .

CTS CORP (CTS)·Q4 2024 Earnings Summary