Please stand by. Good day, and welcome to the CTS Corporation First Quarter 2015 Earnings Conference Call. Today's conference call is being recorded. At this time I'd like to turn the conference over to the Mr. Kieran O’Sullivan. Please go ahead, sir. Kieran O’Sullivan: Thank you. Good morning. And thank you for joining us today. Welcome to the CTS’s first quarter 2015 conference call. In the quarter we advanced our strategic and operational plans and our performance. We continue to make progress on strategy to simplify, to focus and to drive profitable growth. Our planned consolidations are on track, our focus on sense, connect and move, associated with our product lines in progressing and will guide our organic and inorganic investments. We achieved another quarter of strong new business wins which will strengthen our order backlog. We continue to improve our customer focus, although sales were slightly lower in the first quarter of 2014, impacted by foreign exchange rates, we were able to improve our gross margins. Targeted internal investments are progressing; however we do need some improvement in R&D spending in certain product lines. Ashish Agrawal, our CFO is with me on the call today. Ashish will take us through our Safe Harbor statements.

Before beginning the business discussions, 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 yesterday and more information can be found in the company’s SEC filings. To the extent that today's discussions refer to any non-GAAP measures relative to Regulation G, the required explanations and reconciliations are available in the Investor Relations section of the CTS website. I will now turn the discussion back over to our CEO, Kieran O’Sullivan. Kieran O’Sullivan: Thank you, Ashish. Yesterday we reported our first quarter 2015 financial results. First quarter sales were a little over $98 million, down 2% compared to the same quarter last year. Currency impacted sales by $2.3 million as the US Dollar appreciated against certain currencies. The impact was in line with our expectation of 2% to 3% of sales. Gross margins improved by 230 basis points, we were disappointed with our working capital performance but expect to get back on track within the year. Adjusted earnings per share were $0.20, compared to $0.19 in the first quarter of 2014. New business awards for the quarter were $192 million, and our automotive products lines were awarded $92 million in new business and program extensions, driven by customers for paddles. We also gained additional wins with right height sensors, tension sensors, seat belt buckle sensors, with OEMs and with Tier-1s. We extended our smart actuator volumes driven by solid execution on existing platforms. We expect to continue to gain momentum in this platform going forward. Overall automotive market volumes are flat in Europe at approximately 20…

Thank you, Kieran. First quarter 2015 sales were $98.3 million, down 2.4% compared to the same quarter last year. Currency impacted us unfavorably by $2.3 million as the US Dollar appreciated against the Euro and Chinese Renminbi. Gross margin for first quarter 2015 was 32.7% versus 30.4% in the same quarter a year ago. Margins increased year-over-year as we continue to achieve efficiency gains and implement material and labor productivity projects. Currency impact on gross margins was negligible as the unfavorable impact on sales was offset by a favorable impact on costs as the US Dollar appreciated against various local currencies in countries in which we have manufacturing operations. Operating expenses in the first quarter of 2015 were 22% of sales, compared to 19.6% in the same period last year. Operating expenses for the first quarter of 2015 included $738,000 in restructuring charges compared to $503,000 in restructuring charges in the first quarter 2014. Now let's break down the operating expenses. SG&A expenses were $15.7 million in first quarter 2015 compared to $13.6 million in first quarter 2014, this increase was driven by the proceeds from sale of fixed assets recorded in the first quarter of 2014. For our strategy, we have improved the underlined G&A cost and spend more on sales and marketing compared to the same period last year. R&D expenses were $5.2 million in first quarter 2015, compared to $5.6 million in the same period last year. The lower R&D expenses were driven by timing of certain expenses and customer reimbursement. We will continue to invest more in new products to drive organic growth. Net interest in first quarter 2015 was slightly better than the first quarter of 2014 on account of higher cash balances. In the first quarter 2015, other expense was $1.7 million; these were…

Thank you. [Operator Instructions] And we'll now take our first question from John Franzreb with Sidoti & Company.

Good morning, guys. Kieran O’Sullivan: Good morning, John.

Good morning, John.

I guess I want to start with the guidance and the currency part of it. Two parts I guess, currency wasn't – didn't have as finance impact on the first quarter, maybe there was a word about going in there properly. And secondly, on the guidance side, your $92 million does not include that $0.05 to $0.08 potential headwind. I want to make sure I get both of those right.

So John, you are right on the first part of your question in terms of the currency not having as expected large impact on operating earnings. That was primarily driven by getting some benefit from lower cost as the dollar appreciated against certain other currencies raising manufactured products. We did see a translation impact of approximately $0.035 related to the balance sheet assets that we have in non-US dollars. The second part, Kieran had a comment on that. Sorry, the $0.05 to $0.08 impact on earnings is outside of the guidance range, so we are saying that it could impact our guidance by $0.05 to $0.08 on the earnings.

Okay. And on the wins that you recorded in the quarter, recognized nice quarter from the performance of $100 million in new business, can you kind of bracket it – last quarter was another good quarter for wins, when you expect to see some of that appear on the top line Kieran? Kieran O’Sullivan: John, previously as before you will see some modest growth in 2016 and we're targeting as we get the double-digit growth in 2017, I will tell you that the performance in the last quarter was very strong and that $92 million, that's really on the automotive products, it's really even out beyond 2018 and beyond that again. The components had a three year contract with the HTD renewal, that's much more near term so it's in the next three years including some later this year. And what I would tell you on the field side because we spoke before, it's the big challenge that we have in terms of transitioning the growth with the whole profile change in our margin to compliment it, we feel that we've got the most opportunity to move sales on the component side of the business. That said, we've been very clear we've had some softness on some product lines in the component area but we're very pleased with the progress we're making on the products and that we expect some good things to transpire there near term, but I want to be very clear we've got work to do, it's not an easy run but we were happy with the progress from it.

As a general, Kieran, are the electronic wins shouldering duration between winning the contracts and recognizing on the revenue side or is that not the case? Kieran O’Sullivan: No, you're pretty much on the boulder John, and most of the component side is within the current year except for Piezo where you get some encouraged year but also some in the out years and one to two years plus.

Okay, great. And your comments about getting an improvement in R&D spending, could you just elaborate on what you're referring to there? Kieran O’Sullivan: Yes, there is two things. Number one, as Ashish pointed out there was timing in terms of reimbursement, but I'd like us to be giving that spend a little stronger in certain of the product lines, Piezo is one example where we want to expand certain technologies. When we look at the sensors in Megatronics, we feel very good in searching product lines but under sensing side, getting a little deeper and stronger on our spend there, that's really where we're focusing most.

Do you have some sort of… Kieran O’Sullivan: Nothing broken, just trying to strengthen it, and the other aspect of that on the spend is, we've been very clear that our ClearPlex product line which is in for a small sell deployment, that filter application, we expect to ramp up the spend there as we get more design wins.

Are there some sort of hurdle rates that you have to approve before the R&D project proceed?

John, on the R&D projects we will look at those expenses like any other business case, we will evaluate the potential for returns and the risks associated with that investment, just like any other business decision.

Okay, just one last question and I'll get back into queue. Regarding the share repurchase, can you remind me how much cash is overseas versus domestic, and this is if what I think it is, largely overseas, we'll be borrowing to fund some of that share repurchase? Kieran O’Sullivan: John, the majority is overseas and we would be borrowing to do some of that repurchase but when we feel we've got the right strategy and we're moving forward there with executing on the strategy, but we thought it was a good point in time in discussion with the management team and the board to step up the buyback.

Okay, thanks. I'll get back in the queue.

We'll go next to Hendi Susanto with Gabelli & Company.

Good morning, Kieran and Ashish. Kieran O’Sullivan: Good morning, Hendi.

Hi, Hendi.

Kieran and Ashish, I would like to understand more about the FX impacts, so let's say euro weakens further, like how should we think of the potential impact with regards to your guidance?

Hendi, the $0.05 to $0.08 that we are indicating as a potential and favorable impact on earnings, we are looking at the euro getting to about parity with the dollar.

I see. And so if euro did not get into parity with dollar then you are seeing significantly less impact or maybe like not many…

That is correct Hendi, and the other side is, we have manufacturing operations in Canada, in Mexico, in Czech Republic, as well as China other than the US and how those currencies are moving versus the US dollar; and they will also impact so that in the first quarter what we saw was those currencies also depreciated against the dollar and that helped us recover some of the topline loss that we saw as the euro depreciated.

And then Kieran you mentioned about positive environment in the Piezo hard disk drive, I'm wondering whether you can share more insight especially unlike that PC market is weak. Kieran O’Sullivan: I understand your question but the platforms we're on are not being impacted as much, we've got a good forecast. You remember Hendi, we had some softness in inventory buildup in the prior year and we're not seeing any changes there or we would have given an indication of that. And the bigger thing is that we're getting scaled down to more platforms.

Okay. And then, we've got to the Smart Actuator, you said that the volume was higher, could you give some outlook of what the Smart Actuator may look like this year? Kieran O’Sullivan: I don't know we've given guidance before on revenue, I don't think we have…

Maybe the main environment, whether it could be… Kieran O’Sullivan: No, we're not seeing big seasonality, we're seeing some – the business is strong, we've talked in the past about improving the margins which we have, we've also highlighted that this being a new space for us with more complex product, we wanted to make sure we were proven. And then with the temptation I would say to run out and expand or trying to expand more customers very quickly whereas we focused the strategy and said let's make sure we do a good job for our first customer here, prove our capability, and obviously strengthen our performance overall from a margin and quality perspective. And I will tell you what we're seeing now is we're being rewarded with new business and that relationship has continued to strengthen.

Okay. And then Kieran you mentioned about small cell filter applications, I would like to learn that more. What are the end products of that small cell filter applications? Kieran O’Sullivan: Mostly Play Stations would be the first area where we would engage with OEMs and we've had some design wins and we're going to through with testing out the products. But also another small cell applications that would be used for different mobile applications, so we're carefully following that market and really aren’t focused – our first point is on the smaller cell or Play Station side of it because it's a known market and we feel like we've got very good product there in terms of weight, size and performance. And the team is very excited about the progress we're making and we think that this will grow but we're at the mercy of how the markets transition those products over to the new architectures and we're doing all the things, we'll make sure we're ready for that.

Thank you, Ashish and Kieran. Kieran O’Sullivan: Thank you.

Thank you.

We'll go next to Lisa Thompson with Zacks Investment Research.

Good morning. Kieran O’Sullivan: Hi Lisa.

Hi. So I was playing around with the numbers here. Now you said there was an impact of $1.7 million due to currency on net income, on a constant currency basis then would you have earned then $0.25?

Lisa, a $1.7 million is a gross impact, after taxes would be slightly smaller number.

Right. I think I kept the tax out.

The impact on net earnings would be roughly, slightly over $0.03 per share.

Okay. So you would have done more like 20% growth, earnings growth if you didn't have this?

I believe that. Yes, keep in mind that last year also we had a similar currency impact. It just coincidently it was roughly the same magnitude, just a different currency.

So it went the other direction?

No. It recorded an expense last year in the first quarter, and we recorded an expense in the first quarter this year.

Okay. And just to clarify, when you did the adjusted EPS, you don't take out separate compensation right?

No, we don't.

Okay. So it's not really a non-GAAP number, it's the adjusted number. Alright, because that actually gives you a few cents there too because you had much more this quarter than last year. Alright, so this $100 million driver in new orders that are not automotive can you break that down a little bit as to what bucket that belongs in now.

I would give you – we don't guide down to below that level but the majority of that is we've said it was a three year contract in the HTD space which is the extension of our existing HTD business.

Okay, so that's the most of it. And wherever new products are coming on near term, I knew that you're going to do a refresh of some old product lines, you had some new stands coming down. Kieran O’Sullivan: We're working on headlines moving into hefty paddles in one area, on the sensing side we're really expanding on the right high sensing, you see that we talked about this in the call this morning, getting more traction, not just in one region but with other regions as well. The TR Plex, our App solution, something we're very focused on, and we're extending different various in the Actuator space, and I would tell you that we've mentioned also that we're expanding some products in microDSA, in the sonar range which we mentioned in the call, and overall the expansion of sensing capability, you will see that we launched – it's literally [indiscernible] but our first product in the Asian market for the two wheeler market as well. So nothing to report there in terms of wins or anything yet but we started the launch.

Okay, great. Thank you very much. Kieran O’Sullivan: Thank you, Lisa.

And at this time we have one question remaining in the queue. [Operator Instructions] We'll take our next question from John Franzreb with Sidoti & Company.

Yes, just – I don't think it comes up in a while but can you talk a little bit about the competitive landscape, especially in light of the euro or your European competitors becoming more aggressive in pricing? Kieran O’Sullivan: John, we haven't seen significant changes yet obviously with the currency and contracts, that's always something we watch for but we've been gaining momentum with customers in Europe as well. So not to causing a big impact at this point in time.

Okay, great. Kieran O’Sullivan: Something should stay in our radar.

I'm sure. And regarding the guidance, can you talk a little bit about the cadence at the midpoint, it looks like it's roughly $0.27, $0.28 per quarter if it's an even distribution, how does the balance of the years back out as far as the earnings profile for the balance of the year, Kieran? Kieran O’Sullivan: John, let me make sure I understood your question. Was it more centered around currency impact or…

No, I'm just looking at the midpoint of your guidance, mainly to 1.10 [ph], if you take out the first quarter, you're roughly at the midpoint of $0.28, right, per quarter. Kieran O’Sullivan: John what you see in this traditionally, we don't typically break it down by quarter but what you're seeing traditionally is that we're stronger in the second half of the year. As you get into the first quarter of the year, we're ramping up new purchases in the material price reductions and we've got efficiencies going through the operations, so the best way we can help you with that is, we're over stronger in the second half of the year.

Fair enough. And you said you had some selling expense in the first quarter that made the SG&A a little bit higher, are you through with that selling expense or can you just give us little bit of color there?

So John last year in 2014 the recorded – some benefit from sale of assets that impacted our comparisons year-over-year, the underlying G&A is better than last year and the underlying sales and marketing expenses have increased compared to last year.

Alright, so the sales and marketing expenses that have increased, is that a permanent increase or is that temporary?

That was part of our strategy to increase our presence in various parts of the world. So we are looking at that as a consistent increase to further strengthen our sales presence in different parts with the aim of growing our backlog and continuing our growth. Kieran O’Sullivan: And John that's pretty important for us because we want to have more balanced regional business going forward, and I would tell you it's an investment in sales and marketing and we saw some results from that in the fourth quarter of last year as our win in Europe. And the other side of that is complimenting that with some R&D application spend in those regions as well.

Okay, alright. I just wanted to check. Thank you, guys. Kieran O’Sullivan: Welcome, John.

Thank you.

And it appears there are no further questions at this time. Mr. O’Sullivan, I would like to turn the conference back to you for any additional or closing remarks. Kieran O’Sullivan: Okay, well, thank you for joining us today. We continue to drive forward with our strategy with an emphasis on simplification, the focus we have on the business and driving profitable growth, and we're back to work here. So thank you for your time this morning.

This does conclude today's conference. Thank you for your participation, you may now disconnect.