8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): May 6, 2019

MTS SYSTEMS CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MINNESOTA	000-02382	41-0908057
(STATE OR OTHER JURISDICTION OF INCORPORATION)	(COMMISSION FILE NUMBER)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

14000 TECHNOLOGY DRIVE, EDEN PRAIRIE, MN 55344

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

(952) 937-4000

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

N/A

(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.25 par value	MTSC	The Nasdaq Stock Market LLC

1

Item 2.02 Results of Operations and Financial Condition

On May 6, 2019, MTS Systems Corporation (the “Company”) issued a press release announcing the results of operations and financial condition for the fiscal quarter ended March 30, 2019, the second quarter of the Company’s 2019 fiscal year.

During a conference call scheduled to be held at 11:00 a.m. ET on May 7, 2019 the Company’s President and Chief Executive Officer, Dr. Jeffrey A. Graves, and Senior Vice President and Chief Financial Officer, Brian T. Ross, will discuss the Company’s results for the fiscal quarter ended March 30, 2019.

Attached to this Current Report on Form 8-K as Exhibit 99.1 is a copy of the Company’s press release in connection with the announcement. The information in this Item 2.02, including Exhibit 99.1, is furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

The following exhibit is being furnished herewith:

99.1 Press Release dated May 6, 2019 announcing the results of operations and financial condition for the fiscal quarter ended March 30, 2019.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			MTS SYSTEMS CORPORATION
			(Registrant)
Date:	May 6, 2019	By:	/s/ BRIAN T. ROSS
			Brian T. Ross
			Senior Vice President and Chief Financial Officer

3

EX-99.1

MTS News Release

Page 1

Exhibit 99.1

MTS Systems Corporation

14000 Technology Drive

Eden Prairie, MN 55344-2290

Telephone 952-937-4000

Fax 952-937-4515

News Release

FOR IMMEDIATE RELEASE

May 6, 2019

MTS REPORTS FISCAL 2019SECOND QUARTER FINANCIAL RESULTS

EDEN PRAIRIE, MN - May 6, 2019 - MTS Systems Corporation (Nasdaq: MTSC), a leading global supplier of high-performance test systems, motion simulators and sensors, today reported financial results for its fiscal year 2019second quarter ended March 30, 2019.

SECOND QUARTER FINANCIAL AND OPERATING HIGHLIGHTS

Ø Revenue of $233.0 million, reflecting the highest revenue-producing quarter in the history of MTS, including record revenue in both Test & Simulation and Sensors

Ø GAAP diluted earnings per share of $0.73, an increase of $0.29 or 66% year-over-year

Ø Net income margins of 6.1% for the quarter, a year-over-year increase of 167 basis points

Ø Adjusted EBITDA margins of 16.1% for the quarter, a year-over-year increase of 172 basis points

Ø Backlog of $493.5 million, a year-over-year increase of 40%

Ø Declared 149^th consecutive quarterly dividend

FINANCIAL TABLE

	Three Months Ended						Six Months Ended
(in thousands, except per share data - unaudited)	March 30, 2019			March 31, 2018			March 30, 2019			March 31, 2018
Revenue	$	233,046		$	191,323		$	436,227		$	385,485
Revenue % increase (decrease)1	21.8		%	(1.1		)%	13.2		%	(1.8		)%
Gross margin	37.5		%	39.1		%	38.0		%	39.6		%
Operating margin	10.4		%	8.7		%	9.7		%	8.6		%
Earnings before taxes	$	17,076		$	10,176		$	28,273		$	19,646
Net income	14,160			8,438			24,661			41,589
Diluted earnings per share	0.73			0.44			1.27			2.16
Adjusted diluted earnings per share2	0.76			0.45			1.36			2.18
Adjusted EBITDA2	37,554			27,526			67,656			54,404
Cash and cash equivalents, end of period	74,122			84,378
Backlog, end of period	493,468			352,172
Total debt, end of period	464,420			409,733

¹  Revenue growth rates in fiscal year 2019 reflect the acquisition of E2M Technologies B.V. that occurred on November 21, 2018.

²  Refer to the "Non-GAAP Financial Measures" section below for discussion of the calculation of these non-GAAP financial measures.

MTS News Release

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EXECUTIVE COMMENTARY - DR. JEFF GRAVES, PRESIDENT AND CHIEF EXECUTIVE OFFICER

"Our second quarter performance was strong on virtually all key metrics, as we continue to successfully execute on our growth, diversification and operational efficiency strategies. From a top-line perspective, we delivered over 21% revenue growth, supported by record revenues in both our Test & Simulation and Sensors businesses.

From a profitability perspective, we continue to focus intensely on our cost structure and operational efficiency initiatives, which contributed to a 68% increase in net income, with margins rising to 6.1% for the quarter, and a 36% increase in Adjusted EBITDA, equating to a margin of 16.1% for the quarter. This strong performance supported our continuing investments in the business, further deleveraging of our balance sheet and a continued return of cash to our shareholders through our dividend.

Given the volume and quality of the orders we experienced in the first half of our fiscal year and our significant backlog position, we remain confident in our ability to deliver on our strategy of growth and expanded profitability in fiscal year 2019 and beyond."

HIGHLIGHTS FOR THE 2019SECOND FISCAL QUARTER

Revenue

Revenue was $233.0 million, up 21.8% compared to the same prior year period, driven by record revenue in Test & Simulation, which included equipment volume growth in all sectors, a full quarter contribution from the acquisition of E2M, which closed in the first quarter of fiscal year 2019, and continued growth in our Test services activities. Sensors experienced broad demand across all market sectors, as well as the initial ramp-up in volume associated with the U.S. Department of Defense contract, which combined to deliver a record revenue quarter for this business as well.

Orders

Test & Simulation orders for the quarter were $132.1 million, up 25.6% compared to the same prior year period, driven primarily by a large order in the ground vehicles sector of our Test & Simulation business, increased demand across the structures and simulation sectors, and strong growth in the Americas region.

Sensors orders for the quarter were $79.4 million, a 5.7% decrease over the same prior year period. This decline was primarily driven by weakness in the European and Asian regions specific to our Sensors position and systems sectors, partially offset by solid demand in the Americas region of our Sensors position sector and orders growth in our Sensors industrial sector from a slight rebound in the energy market.

Backlog

Backlog remained very strong at $493.5 million, up 40.1% from the same prior year period. Sequentially from the first quarter of fiscal year 2019, backlog was down 4.1% from our all-time high of $514.7 million as we saw a high-level of conversion to revenue on outstanding projects within the quarter.

Earnings Before Taxes

Earnings before taxes of $17.1 million was up $6.9 million compared to the same prior year period. This earnings increase was driven by growth in Test & Simulation gross profit, partially offset by higher operating expenses in both businesses and $0.5 million acquisition inventory fair value adjustment related to the acquisition of E2M.

Net Income and Diluted Earnings Per Share

Diluted earnings per share was $0.73 compared to $0.44 in the same prior year period on net income of $14.2 million and $8.4 million, respectively. The $0.29 increase was primarily driven by growth in Test & Simulation gross profit. Second quarter of fiscal year 2019 results were impacted by $0.03 of non-recurring costs associated with the acquisition inventory fair value adjustment and acquisition-related expenses. Similarly, results for the second quarter of fiscal year 2018 include a $0.01 impact for non-recurring restructuring expense. Adjusting for these items, adjusted diluted earnings per share was $0.76 for the second quarter of fiscal 2019, and $0.45 for the same period in the prior year.

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Adjusted EBITDA

Adjusted EBITDA grew to $37.6 million in the second quarter of fiscal year 2019, up 36.4% compared to the same prior year period and 24.8% sequentially from the first quarter of fiscal year 2019. This growth was primarily due to significantly higher Test & Simulation gross profit and a full quarter contribution from the acquisition of E2M, partially offset by higher operating expenses in both Test & Simulation and Sensors. A reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income, the most directly comparable GAAP financial measure, is provided in Exhibit D of this earnings release.

Capital Structure

During the quarter, our total debt balance decreased by $2.6 million. With a strong backlog and positive cash flow forecast, we expect to continue to pay down our debt, thus continuing to reduce our leverage ratio, between now and the end of fiscal year 2019.

Dividend

The Board of Directors declared a quarterly dividend of $0.30 per share. The dividend was payable on April 1, 2019 to shareholders of record as of the close of business on March 18, 2019. This was our 149^th consecutive quarterly dividend.

OUTLOOK

Test & Simulation Business

Looking forward, our strong performance during the first half of fiscal year 2019 supports our positive outlook for our Test & Simulation business. From a revenue perspective, our near-record backlog at mid-year reflects strong sales momentum driven by the rapidly expanding use of advanced materials, such as carbon-fiber composites, the adoption of additive manufacturing methods for net-shape component fabrications, and the rapidly increasing complexity of ground and air vehicles which requires new simulation methods for determining product performance and life. Our energy and infrastructure markets remain robust, driven by continued growth in wind power and advanced building designs which are more resistant to damage from earthquakes, sea and storm events. In addition, the acquisition of E2M diversifies us further into flight simulation, entertainment and other advanced simulation markets that further expand our growth opportunities.

In addition to our exciting growth opportunities, we continue to invest in operational efficiency initiatives to improve profitability, and in new products and technologies to drive margin expansion and to generate continued strong demand for Test & Simulation products and services.

Sensors Business

Strong demand in our Sensors business is anticipated to continue during fiscal year 2019 across all sectors, driven by accelerating new product introductions across all major markets and geographies, and expanded opportunities associated with the U.S. Department of Defense. This combination of positive factors, including full production ramp-up of sensors for the U.S. military, is expected to provide double digit top-line growth for the second half of the fiscal year, along with Adjusted EBITDA margin expansion for the Sensors business for the remainder of fiscal year 2019.

Consolidated

Based on these factors, we are confident in our outlook for fiscal year 2019 and are maintaining our full year guidance as:

Metric	Current Outlook
Revenue	$830 million to $870 million
Adjusted EBITDA	$122 million to $142 million
Diluted earnings per share	$2.30 to $2.60
Adjusted diluted earnings per share	$2.42 to $2.72

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The above outlook includes:

• $8.5 million to $11.0 million for stock-based compensation, restructuring expenses, acquisition-related expenses and acquisition fair value inventory adjustment;

• Our acquisition of E2M, in addition to the slightly positive effects of the implementation of the new revenue recognition standard as compared to the previous standard; and

• An anticipated effective tax rate, excluding discrete tax items, of 15-18% for fiscal year 2019.

A reconciliation of Adjusted EBITDA and Adjusted diluted earnings per share, non-GAAP financial measures, to net income and diluted earnings per share, the most directly comparable GAAP financial measures, respectively, for the above outlook is included in Exhibits E and F of this earnings release, respectively.

SECOND QUARTER CONFERENCE CALL

As announced on April 22, 2019, a conference call will be held on May 7, 2019 (tomorrow), at 10:00 a.m. ET (9:00 a.m. CT). Dr. Jeffrey A. Graves, President and Chief Executive Officer, and Brian T. Ross, Senior Vice President and Chief Financial Officer, will host the call, which will include a question and answer session after prepared remarks.

Call toll free +1-800-667-5617 (international toll +1-334-323-0509) and reference the conference pass code 1389363. Telephone replay will be available at 1:00 p.m. ET following the call until 1:00 p.m. ET, May 14, 2019. Call toll free +1-888-203-1112 and reference the conference pass code 1389363.

A transcript of the call can also be accessed from the MTS website at http://investor.mts.com beginning on May 8, 2019.

ABOUT MTS SYSTEMS CORPORATION

MTS Systems Corporation’s testing and simulation hardware, software and service solutions help customers accelerate and improve their design, development and manufacturing processes and are used for determining the mechanical behavior of materials, products and structures. MTS’ high-performance sensors provide measurements of vibration, pressure, position, force and sound in a variety of applications. MTS had 3,400 employees as of September 29, 2018 and revenue of $778 million for the fiscal year ended September 29, 2018. Additional information on MTS can be found at www.mts.com.

NON-GAAP FINANCIAL MEASURES

We believe that disclosing adjusted diluted earnings per share, which is diluted earnings per share excluding the impact from restructuring expenses, acquisition-related expenses and the acquisition inventory fair value adjustment is useful to investors as a measure of operating performance. We use this as one measure to monitor and evaluate operating performance. Adjusted diluted earnings per share is a financial measure that does not reflect United States Generally Accepted Accounting Principles (GAAP). We calculate this measure by adding back the after-tax effect of the restructuring expenses, acquisition-related expenses and the acquisition inventory fair value adjustment to net income and dividing the result by the diluted weighted average shares outstanding.

We believe that disclosing earnings before interest, taxes, depreciation and amortization (EBITDA), EBITDA excluding the impact from stock-based compensation, restructuring expenses, acquisition-related expenses and the acquisition inventory fair value adjustment (Adjusted EBITDA) and Adjusted EBITDA divided by revenue (Adjusted EBITDA margin) are useful to investors as a measure of leverage and operating performance. We use these measures to monitor and evaluate leverage and operating performance. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are financial measures that do not reflect GAAP. We calculate EBITDA by adding back interest, taxes, depreciation and amortization expense to net income. Adjusted EBITDA is calculated by adding back stock-based compensation, restructuring expenses, acquisition-related expenses and the acquisition inventory fair value adjustment to EBITDA. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenue.

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We believe that disclosing free cash flow is useful to investors as a measure of operating performance. We use this measure as an indicator of our strength and ability to generate cash. Free cash flow is a financial measure that does not reflect GAAP. We calculate free cash flow as net cash provided by (used in) operating activities less purchases of property and equipment and businesses, net of cash acquired, plus cash proceeds from sales of property and equipment.

Investors should consider these non-GAAP financial measures in addition to, not as a substitute for or better than, financial measures prepared in accordance with GAAP. Reconciliations of the components of these measures to the most directly comparable GAAP financial measures are included in Exhibits B, C, D, E, F and G of this earnings release.

FORWARD-LOOKING STATEMENTS

This earnings release contains "forward-looking statements" made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 that are subject to certain risks and uncertainties, as well as assumptions, that could cause actual results to differ materially from historical results and those presently anticipated or projected. Statements made under the heading "Outlook" are forward-looking statements, and words such as "may," "will," "should," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and similar expressions identify forward-looking statements in other parts of this earnings release. Such statements include, but are not limited to, statements about future financial and operating results, plans, objectives, expectations and intentions, statements about the opportunities and outlook for our Sensors and Test & Simulation sectors and other statements that are not historical facts. These statements are based on our current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. Risks, uncertainties and assumptions that could cause our actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to, those described in the "Risk Factors" section of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") and updated in any subsequent Quarterly Reports on Form 10-Q and other filings with the SEC. The reports referenced above are available on our website at www.mts.com or on the SEC’s website at www.sec.gov. Forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events or circumstances.

INVESTOR RELATIONS CONTACT

Brian Ross

Senior Vice President and Chief Financial Officer

brian.ross@mts.com

(952) 937-4000

MTS News Release

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MTS SYSTEMS CORPORATION
Consolidated Statements of Income
(unaudited - in thousands, except per share data)
	Three Months Ended						Six Months Ended
	March 30, 2019			March 31, 2018			March 30, 2019			March 31, 2018
Revenue
Product	$	206,690		$	165,453		$	381,769		$	334,694
Service	26,356			25,870			54,458			50,791
Total revenue	233,046			191,323			436,227			385,485
Cost of sales
Product	129,579			101,133			237,746			201,627
Service	16,117			15,365			32,826			31,105
Total cost of sales	145,696			116,498			270,572			232,732
Gross profit	87,350			74,825			165,655			152,753
Gross margin	37.5		%	39.1		%	38.0		%	39.6		%
Operating expenses
Selling and marketing	33,395			30,597			65,484			62,625
General and administrative	22,105			18,992			43,183			39,554
Research and development	7,676			8,626			14,848			17,467
Total operating expenses	63,176			58,215			123,515			119,646
Income from operations	24,174			16,610			42,140			33,107
Operating margin	10.4		%	8.7		%	9.7		%	8.6		%
Interest expense, net	(7,368		)	(6,708		)	(14,186		)	(13,512		)
Other income (expense), net	270			274			319			51
Income before income taxes	17,076			10,176			28,273			19,646
Income tax provision (benefit)	2,916			1,738			3,612			(21,943		)
Net income	$	14,160		$	8,438		$	24,661		$	41,589
Earnings per share
Basic
Earnings per share	$	0.74		$	0.44		$	1.28		$	2.17
Weighted average common shares outstanding	19,251			19,150			19,234			19,137
Diluted
Earnings per share	$	0.73		$	0.44		$	1.27		$	2.16
Weighted average common shares outstanding	19,441			19,273			19,393			19,258
Dividends declared per share	$	0.30		$	0.30		$	0.60		$	0.60

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MTS SYSTEMS CORPORATION
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
	March 30, 2019			September 29, 2018
ASSETS
Current assets
Cash and cash equivalents	$	74,122		$	71,804
Accounts receivable, net	117,349			122,243
Unbilled accounts receivable, net	71,175			70,474
Inventories, net	179,071			139,109
Other current assets	32,307			24,572
Total current assets	474,024			428,202
Property and equipment, net	88,126			90,269
Goodwill	403,425			369,275
Intangible assets, net	287,101			246,138
Other long-term assets	7,958			5,512
Total assets	$	1,260,634		$	1,139,396
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt, net	$	28,076		$	32,738
Accounts payable	39,941			47,886
Advance payments from customers	102,033			80,131
Other accrued liabilities	89,453			78,358
Total current liabilities	259,503			239,113
Long-term debt, less current maturities, net	436,344			355,640
Other long-term liabilities	79,733			66,711
Total liabilities	775,580			661,464
Shareholders' equity
Common stock, $0.25 par; 64,000 shares authorized:
17,900 and 17,856 shares issued and outstanding as
of March 30, 2019 and September 29, 2018, respectively	4,475			4,464
Additional paid-in capital	176,918			171,407
Retained earnings	308,279			300,585
Accumulated other comprehensive income (loss)	(4,618		)	1,476
Total shareholders' equity	485,054			477,932
Total liabilities and shareholders' equity	$	1,260,634		$	1,139,396

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MTS SYSTEMS CORPORATION
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
	Three Months Ended						Six Months Ended
	March 30, 2019			March 31, 2018			March 30, 2019			March 31, 2018
Cash Flows from Operating Activities
Net income	$	14,160		$	8,438		$	24,661		$	41,589
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Stock-based compensation	2,895			1,668			4,689			3,290
Fair value adjustment to acquired inventory	539			—			984			—
Depreciation and amortization	9,508			8,612			18,468			17,348
(Gain) loss on sale or disposal of property and equipment	349			92			510			159
Amortization of financing fees	1,039			1,316			2,099			2,626
Deferred income taxes	15			(302		)	(1,243		)	(30,654		)
Other	659			963			1,087			1,687
Changes in operating assets and liabilities	(9,126		)	7,248			(20,586		)	1,213
Net Cash Provided by (Used in) Operating Activities	20,038			28,035			30,669			37,258
Cash Flows from Investing Activities
Purchases of property and equipment	(5,576		)	(2,567		)	(9,349		)	(5,368		)
Proceeds from sale of property and equipment	—			—			10			69
Purchases of business, net of cash acquired	(3,794		)	—			(81,826		)	—
Other	—			823			(285		)	823
Net Cash Provided by (Used in) Investing Activities	(9,370		)	(1,744		)	(91,450		)	(4,476		)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt	—			—			80,391			—
Payments on financing arrangements, net	(2,664		)	(33,550		)	(6,783		)	(50,447		)
Cash dividends	(5,365		)	(5,337		)	(10,724		)	(10,667		)
Proceeds from exercise of stock options and employee stock purchase plan	663			533			701			745
Payments to purchase and retire common stock	(42		)	(13		)	(398		)	(757		)
Net Cash Provided by (Used in) Financing Activities	(7,408		)	(38,367		)	63,187			(61,126		)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	424			2,383			(88		)	3,989
Cash and Cash Equivalents
Increase (decrease) during the period	3,684			(9,693		)	2,318			(24,355		)
Balance, beginning of period	70,438			94,071			71,804			108,733
Balance, End of Period	$	74,122		$	84,378		$	74,122		$	84,378

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Exhibit A
MTS SYSTEMS CORPORATION
Segment Financial Information
(unaudited - in thousands)
	Three Months Ended
	March 30, 2019			March 31, 2018			% Variance
Test & Simulation Segment
Revenue	$	151,032		$	110,238		37	%
Cost of sales	103,742			76,011			36	%
Gross profit	47,290			34,227			38	%
Gross margin	31.3		%	31.0		%
Operating expenses	34,606			30,932			12	%
Income from operations	$	12,684		$	3,295		285	%
Sensors Segment
Revenue	$	82,375		$	81,542		1	%
Cost of sales	42,301			40,922			3	%
Gross profit	40,074			40,620			(1	)%
Gross margin	48.6		%	49.8		%
Operating expenses	28,570			27,283			5	%
Income from operations	$	11,504		$	13,337		(14	)%
Intersegment Eliminations
Revenue	$	(361	)	$	(457	)
Cost of sales	(347		)	(435		)
Gross profit	(14		)	(22		)
Income (loss) from operations	$	(14	)	$	(22	)
Total Company
Revenue	$	233,046		$	191,323		22	%
Cost of sales	145,696			116,498			25	%
Gross profit	87,350			74,825			17	%
Gross margin	37.5		%	39.1		%
Operating expenses	63,176			58,215			9	%
Income from operations	$	24,174		$	16,610		46	%

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Exhibit B
MTS SYSTEMS CORPORATION
Reconciliation of Earnings Per Share Excluding Restructuring, Acquisition-Related
and Acquisition Inventory Fair Value Adjustment Expenses
(unaudited - in thousands, except per share data)
	Three Months Ended
	March 30, 2019						March 31, 2018
	Pre-Tax		Tax		Net		Pre-Tax		Tax		Net
Net income	$	17,076	$	2,916	$	14,160	$	10,176	$	1,738	$	8,438
Restructuring expenses 1	—		—		—		362		92		270
Acquisition-related expenses 2	262		55		207		—		—		—
Acquisition inventory fair value adjustment 1	539		81		458		—		—		—
Adjusted net income 3	$	17,877	$	3,052	$	14,825	$	10,538	$	1,830	$	8,708
Weighted average diluted common shares outstanding					19,441						19,273
Diluted earnings per share	$	0.88	$	0.15	$	0.73	$	0.53	$	0.09	$	0.44
Impact of restructuring expenses	—		—		—		0.02		0.01		0.01
Impact of acquisition-related expenses	0.01		—		0.01		—		—		—
Impact of acquisition inventory fair value adjustment	0.03		0.01		0.02		—		—		—
Adjusted diluted earnings per share3	$	0.92	$	0.16	$	0.76	$	0.55	$	0.10	$	0.45
1 In determining the tax impact of restructuring expenses and acquisition inventory fair value adjustment, we applied the statutory rate in effect for each jurisdiction where the expenses were incurred.
2 In determining the tax impact of acquisition-related expenses, we applied a U.S. effective income tax rate before discrete items to these expenses.
3  Denotes non-GAAP financial measure.

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Exhibit C
MTS SYSTEMS CORPORATION
Reconciliation of Earnings Per Share Excluding Restructuring, Acquisition-Related
and Acquisition Inventory Fair Value Adjustment Expenses
(unaudited - in thousands, except per share data)
	Six Months Ended
	March 30, 2019						March 31, 2018
	Pre-Tax		Tax		Net		Pre-Tax		Tax			Net
Net income	$	28,273	$	3,612	$	24,661	$	19,646	$	(21,943	)	$	41,589
Restructuring expenses 1	130		33		97		608		154			454
Acquisition-related expenses 2	1,035		217		818		—		—			—
Acquisition inventory fair value adjustment 1	984		148		836		—		—			—
Adjusted net income 3	$	30,422	$	4,010	$	26,412	$	20,254	$	(21,789	)	$	42,043
Weighted average diluted common shares outstanding					19,393							19,258
Diluted earnings per share	$	1.46	$	0.19	$	1.27	$	1.02	$	(1.14	)	$	2.16
Impact of restructuring expenses	0.01		—		0.01		0.03		0.01			0.02
Impact of acquisition-related expenses	0.05		0.01		0.04		—		—			—
Impact of acquisition inventory fair value adjustment	0.05		0.01		0.04		—		—			—
Adjusted diluted earnings per share3	$	1.57	$	0.21	$	1.36	$	1.05	$	(1.13	)	$	2.18
1 In determining the tax impact of restructuring expenses and acquisition inventory fair value adjustment, we applied the statutory rate in effect for each jurisdiction where the expenses were incurred.
2 In determining the tax impact of acquisition-related expenses, we applied a U.S. effective income tax rate before discrete items to these expenses.
3  Denotes non-GAAP financial measure.

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Exhibit D
MTS SYSTEMS CORPORATION
Reconciliation of EBITDA and Adjusted EBITDA to Net Income
(unaudited - in thousands)
	Three Months Ended						Six Months Ended
	March 30, 2019			March 31, 2018			March 30, 2019			March 31, 2018
Net income	$	14,160		$	8,438		$	24,661		$	41,589
Net income margin	6.1		%	4.4		%	5.7		%	10.8		%
Income tax provision (benefit)	2,916			1,738			3,612			(21,943		)
Interest expense, net	7,368			6,708			14,186			13,512
Depreciation and amortization	9,508			8,612			18,468			17,348
EBITDA 1	33,952			25,496			60,927			50,506
Stock-based compensation	2,895			1,668			4,689			3,290
Restructuring expenses	—			362			130			608
Acquisition-related expenses 2	168			—			926			—
Acquisition inventory fair value adjustment	539			—			984			—
Adjusted EBITDA 1	$	37,554		$	27,526		$	67,656		$	54,404
Adjusted EBITDA margin 1,3	16.1		%	14.4		%	15.5		%	14.1		%
1  Denotes non-GAAP financial measure.
2  Acquisition-related expenses were adjusted to exclude stock-based compensation that is otherwise included in the stock-based compensation line.
3  Adjusted EBITDA was divided by revenue when calculating the Adjusted EBITDA margin.

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Exhibit E
MTS SYSTEMS CORPORATION
Free Cash Flow
(unaudited - in thousands)
	Three Months Ended						Six Months Ended
	March 30, 2019			March 31, 2018			March 30, 2019			March 31, 2018
Net Cash Provided by (Used in) Operating Activities	$	20,038		$	28,035		$	30,669		$	37,258
Purchases of property and equipment	(5,576		)	(2,567		)	(9,349		)	(5,368		)
Proceeds from sale of property and equipment	—			—			10			69
Free cash flow1	$	14,462		$	25,468		$	21,330		$	31,959
1  Denotes non-GAAP financial measure.

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Exhibit F
MTS SYSTEMS CORPORATION
Reconciliation of EBITDA and Adjusted EBITDA to Net Income - Outlook
(unaudited - in thousands)
	Twelve Months Ending
	September 28, 2019
	Low		High
Net income	$	44,500	$	50,000
Income tax provision (benefit)	7,000		11,000
Interest expense, net	26,000		28,000
Depreciation and amortization	36,000		42,000
EBITDA1	113,500		131,000
Stock-based compensation and non-recurring expenses2	8,500		11,000
Adjusted EBITDA1	$	122,000	$	142,000
1  Denotes non-GAAP financial measure.
2  Includes pre-tax forecast expenses for stock-based compensation, restructuring expenses, acquisition-related expenses and acquisition inventory fair value adjustment.

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Exhibit G
MTS SYSTEMS CORPORATION
Reconciliation of Diluted Earnings per Share and Adjusted Diluted Earnings per Share - Outlook
(unaudited - in thousands)
	Twelve Months Ending
	September 28, 2019
	Low		High
Net income1	$	44,500	$	50,000
Non-recurring expenses 2	2,250		2,300
Adjusted net income 3	$	46,750	$	52,300
Weighted average diluted common shares outstanding	19,350		19,250
Diluted earnings per share	$	2.30	$	2.60
Impact of non-recurring expenses2	0.12		0.12
Adjusted diluted earnings per share	$	2.42	$	2.72
1 Refer to Exhibit F for tax impact on net income guidance.
2  Includes forecast expenses for restructuring expenses, acquisition-related expenses and acquisition inventory fair value adjustment.
3  Applied anticipated tax rate, excluding discrete tax items, of approximately 15-18%.