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    CTS
    Earnings call· Jun 2026(Q2 FY26)

    CTS Q2 FY26 earnings call CTS

    Jul 28, 2026 Source

    Executive summary

    CTS Corporation Q2 FY26 — Record Profitability Driven by Diversified End Markets

    CTS Corporation delivered record profitability in Q2 FY26, driven by robust growth in its diversified end markets, which now constitute 59% of total sales. The company raised its full-year guidance for both sales and adjusted EPS, reflecting confidence in its growth strategy and operational execution, despite ongoing softness in the transportation sector and some timing-related headwinds in aerospace and defense.

    Highlights

    5

    • Total revenue grew 7% year-over-year to $145 million.

    • Diversified end markets revenue increased 15% year-over-year, representing 59% of total sales.

    • Adjusted gross margin reached a record 41.5%, up 270 basis points year-over-year.

    • Adjusted diluted EPS was a record $0.74, a 30% increase compared to Q2 FY25.

    • Strong operating cash flow of $33 million and free cash flow of $29 million were generated.

    Concerns

    3

    • Transportation sales decreased 2% year-over-year to $59 million.

    • Global light vehicle production volumes are forecasted to be flat to modestly down for full-year 2026 due to tariff, geopolitical, and consumer demand uncertainties.

    • Aerospace and Defense sales were down 15% year-over-year to $18 million, primarily due to timing of program funding.

    Guidance & targets

    3
    CategoryTargetConfidence
    Full-year 2026 Sales
    $565 million to $585 million
    high materiality
    High
    Full-year 2026 Adjusted Diluted EPS
    $2.55 to $2.70
    high materiality
    High
    Full-year Effective Tax Rate
    21% to 23%
    medium materiality
    Medium

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Diversified End Markets
    Increased to 59% of overall company revenue, up from 55% in the prior year period. For the first half of 2026, diversified sales were up 16%.
    % of total sales: 59%
    		—15%—more profitable
    Medical
    Fueled by broad-based demand across sensing and actuation technologies. Actively engaged in multiple next-generation product development programs. Capacity expansion is in place and ramping up.
    Book-to-bill ratio: 1.21
    		$28 million45%14%stronger margins
    Aerospace and Defense
    Primarily reflecting the timing of program funding and government contract awards. Expect a stronger second half of the year supported by robust bookings and expanding opportunity pipeline.
    Book-to-bill ratio: 1.23New customers added: 1
    		$18 million-15%4%—
    Industrial
    Continued strong momentum, further extending the recovery trend that began in 2025. Growth was broad-based across OEM customers and distribution partners. Expect demand to remain healthy through 2026.
    Book-to-bill ratio: 1.11New customers added: 2
    		$40 million16%6%—
    Transportation
    New business awards were exceptional, including a record $100 million sensor award with a North American OEM. Global light vehicle production volumes forecasted flat to modestly down.
    New business awards: $163 millionNew EV customer: 1
    		$59 million-2%-2%—

    Operational metrics

    13
    Non-GAAP gross margin
    41.5%up 270 basis points YoY
    Q2 FY26

    Record gross margin. Foreign currency changes favorably impacted by approximately $1 million.

    Adjusted EBITDA margin
    25.4%up 240 basis points YoY
    Q2 FY26
    Non-GAAP EPS
    $0.74up from $0.57 YoY (30% increase)
    Q2 FY26

    Record adjusted diluted earnings per share.

    Cash and investments balance
    $108 million
    Q2 FY26

    At the end of the quarter.

    Net debt
    -$53 million
    Q2 FY26

    Calculated from cash balance of $108 million and borrowings of $55 million at quarter end (net cash position).

    Capex
    $4.6 million
    Q2 FY26
    Share repurchase amount
    $3.5 million
    Q2 FY26
    Remaining share repurchase authorization
    $78 million
    Q2 FY26

    Under current share repurchase program.

    Effective tax rate
    21.8%
    Q2 FY26
    Foreign currency impact on sales
    $1.4 millionfavorable
    Q2 FY26
    New customers added
    2
    Q2 FY26

    Expanding presence in process instrumentation and next generation cryogenic nano positioning applications.

    New customers added
    1
    Q2 FY26

    Focuses on defense satellite communication solutions.

    New EV customer
    1
    Q2 FY26

    For a seat track position sensor in North America.

    Industry KPIs

    7
    MetricValueDetails
    Orders book to bill1.1
    Segment revenue growth$145 millionUSD
    Design wins product cycle rampsmultiple design wins
    Order visibility backlog policy$1.2 billionUSD
    Capacity expansion internal sourcingcapacity expansion in medical
    End market revenue mix organic growthDiversified end markets: 59%%
    Operating margin incremental leverage25.4%%

    Orderbook & backlog

    7
    Book-to-bill ratio1.1Q2 FY26

    Reflecting sustained customer demand across our portfolio.

    Book-to-bill ratio1.17Q2 FY26

    Diversified bookings were particularly strong.

    Book-to-bill ratio1.21Q2 FY26

    Medical segment book-to-bill, reinforcing confidence in the sustainability of current demand trends.

    Book-to-bill ratio1.23Q2 FY26

    Aerospace and Defense segment book-to-bill, supports future growth.

    Book-to-bill ratio1.11Q2 FY26

    Industrial segment book-to-bill, bookings remained healthy.

    Total booked business$1.2 billionend of Q2 FY26

    up approximately $100 million from Q1

    New business awards$163 millionQ2 FY26

    Transportation segment new business awards, driven by strong awards across sensor portfolio and food controls with OEMs in North America, Japan, China, and Europe.

    Risks & headwinds

    4
    Global light vehicle production volumesfull year 2026

    flat to modestly down

    Mitigation: Closely monitor and evaluate the tariff and geopolitical environment, including recent tariff announcements.

    Tariff and geopolitical environmentnear term

    not anticipating any material impact from the recent tariff announcements

    Mitigation: Monitor further developments; focus remains on agility in adapting to cost and price adjustments in close collaboration with customers and suppliers.

    Input cost pressures (Section 232 tariff changes, precious metal inflation)ongoing

    cost neutral (effect on margins)

    Mitigation: Partnering with customers and suppliers to keep the effect on our margins broadly cost neutral.

    Timing of program funding and government contract awards (Aerospace & Defense)Q2 FY26

    down 15% year-over-year (Q2 A&D sales)

    Mitigation: Expect a stronger second half of the year supported by robust bookings, an expanding opportunity pipeline, and increasing participation.

    What to watch in Q3 FY26

    5

    Medical therapeutics volume

    second half of the year
    Currentramping up
    Targetmore normalized

    Why it matters

    Indicates the realization of demand following capacity expansion and sustained growth in the medical segment.

    And we do expect, especially in the therapeutics application, volume start to get more normalized in the second half of the year.

    Q&A highlights

    8

    John asked Prateek about his observations since joining CTS and how his leadership might differ from his predecessor.

    Prateek highlighted his two years leading the diversified end market business, emphasizing the growth opportunities there. He stated that the core strategy remains the Evolution 2030, focusing on accelerating growth in diversified markets while stabilizing transportation.

    “what we are trying to work towards is an acceleration of our growth strategy. across the diversified end markets at the same time stabilizing our transportation business.”

    asked by John Franz Reb · answered by Pratik Trivedi

    2 min read6 chapters

    Detailed Narrative

    01

    Diversified End Market Performance

    The diversified end markets (Medical, Industrial, Aerospace & Defense) collectively grew 15% year-over-year, now accounting for 59% of total sales, up from 55% in the prior year. This segment's strong performance and higher profitability are central to the company's strategy of diversification and improving earnings quality. For the first half of 2026, diversified sales were up 16%.

    02

    Medical Market Strength

    The medical end market was a significant growth driver, with revenue increasing 45% year-over-year to $28 million and a book-to-bill ratio of 1.21. This growth was broad-based across sensing and actuation technologies, particularly in advanced diagnostics and therapeutic treatments. The company is actively engaged in next-generation product development with leading global medical equipment OEMs, positioning CTS for future platform launches.

    03

    Industrial Market Momentum

    The industrial end market continued its strong recovery trend, with sales of $40 million, up 16% year-over-year and 6% sequentially. Growth was broad-based across OEM customers and distribution partners, with a healthy book-to-bill ratio of 1.11. The company secured multiple design wins across diverse applications, including distribution components, industrial printing, EMI filters, and temperature sensing solutions, and added two new customers.

    04

    Transportation Segment Dynamics

    Transportation sales were down 2% year-over-year and sequentially to $59 million. Despite the decline, the segment secured exceptional new business awards totaling $163 million, including a record $100 million sensor award with a North American OEM and a new EV customer win for a seat track position sensor. The company is focused on expanding powertrain-agnostic solutions, with total booked business reaching $1.2 billion.

    05

    Operational Execution and Profitability

    The company achieved record adjusted gross margin of 41.5%, a 270 basis point improvement year-over-year, and adjusted EBITDA margin of 25.4%, up 240 basis points. These improvements were driven by operational execution, favorable end-market mix, and foreign currency benefits. Management continues to monitor and mitigate the impact of tariffs, precious metal inflation, and input cost pressures to maintain broadly cost-neutral margins.

    06

    Capital Allocation and Liquidity

    CTS maintains a strong balance sheet with $108 million in cash and $55 million in borrowings at quarter-end. The company generated $33 million in operating cash flow and $29 million in free cash flow. It continues a balanced capital allocation approach, including strategic investments in growth and returning cash to shareholders, repurchasing $3.5 million of stock (64,000 shares) in the quarter, with $78 million remaining under its current program.

    AI-generated summary of the company’s earnings call. Not investment advice.