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CTCTS

CTS (CTS) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Jul 28, 2026

Source: earnings call transcript

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

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

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%—

Orderbook & backlog

Book-to-bill ratio 1.1 Q2 FY26

Reflecting sustained customer demand across our portfolio.

Book-to-bill ratio 1.17 Q2 FY26

Diversified bookings were particularly strong.

Book-to-bill ratio 1.21 Q2 FY26

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

Book-to-bill ratio 1.23 Q2 FY26

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

Book-to-bill ratio 1.11 Q2 FY26

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

Total booked business $1.2 billion end of Q2 FY26

up approximately $100 million from Q1

New business awards $163 million Q2 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

Global light vehicle production volumes full year 2026

flat to modestly down

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

Tariff and geopolitical environment near 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

Medical therapeutics volume

second half of the year
Current ramping up
Target more 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.

Find out whether CTS delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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%.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.