CTS Q3 Revenue Rises 5% as Adjusted Gross Margin Reaches 42.2%

CTS Corporation reported higher third-quarter revenue and wider adjusted margins as growth across its diversified end markets complemented modest gains in transportation. The sensor and components manufacturer also set updated full-year 2026 guidance, including the expected impact of its Millar acquisition, for revenue of $580 million to $590 million and adjusted diluted earnings of $2.78 to $2.88 per share.

Revenue for the quarter ended September 30 rose 5% year over year and 3% sequentially to $149.6 million. Adjusted gross margin expanded 330 basis points from a year earlier to 42.2%, which CTS attributed to operating performance, business mix and favorable foreign exchange movements. Adjusted diluted earnings increased to $0.77 per share from $0.60, while adjusted EBITDA margin rose 90 basis points to 24.7%.

On a GAAP basis, net income was $17.8 million, or $0.61 per diluted share, compared with $13.7 million, or $0.46 per share, in the prior-year quarter. Operating earnings increased to $25.5 million from $20.9 million, lifting the operating margin to 17.1% from 14.6%.

CTS recorded a companywide book-to-bill ratio of 1.18. The measure represents customer orders received relative to revenue recorded during the period, but the company cautioned that orders can be amended, terminated or canceled.

Diversified markets lead growth

Revenue from CTS’s diversified end markets increased 7% and represented 60% of third-quarter sales. Their combined book-to-bill ratio was 1.3, indicating bookings exceeded recognized revenue during the period.

Medical revenue rose 21% year over year to $27 million, though it declined 4% sequentially. The segment’s book-to-bill ratio was 0.7, with bookings down 5% because of order timing. CTS reported wins in implantable pacemakers, ultrasound diagnostics, precision measurement and therapeutic applications.

Aerospace and defense revenue fell 7% from a year earlier to $24 million but increased 30% sequentially. Bookings more than doubled year over year, producing a book-to-bill ratio of 1.9. CTS said it was scaling a critical sensing solution for a U.S. Navy undersea-warfare application.

Industrial sales advanced 7% year over year and 1% sequentially to $40 million, with a book-to-bill ratio of 1.36. Design wins covered data centers, automation, connectivity, digitalization and energy-efficiency applications, while the company also added a customer for temperature sensing.

Transportation revenue increased 2% year over year and 1% sequentially to $60 million. Total booked transportation business stood at $1.2 billion at the end of the quarter. CTS cited activity in eBrake technology, foot controls and sensing applications, along with a new customer win in seat-track position sensing. The total-booked-business measure reflects expected revenue over the remaining life of long-term customer agreements and is subject to revisions based on market, customer and currency developments.

Millar acquisition supports diversification

CTS said the Millar acquisition adds precision pressure-sensing capabilities for medical, life-sciences and industrial uses. Millar brings more than 55 years of sensing experience in the United States and Europe, with technologies including MEMS pressure, pH and conductivity sensing.

The acquired business is expected to generate about $30 million in annual revenue and become accretive in the second half of 2027. CTS identified neurological monitoring, cardiovascular applications, implantable sensing and industrial water-quality measurement among the target markets. Its 2026 revenue and adjusted earnings guidance includes the expected acquisition impact.

Cash flow and outlook

Operating cash flow totaled $94.3 million for the first nine months of 2026, up from $72.9 million a year earlier. Free cash flow, a non-GAAP measure, increased to $82.3 million from $60.4 million, while capital expenditures were $12 million. CTS returned $19 million to shareholders through dividends and share repurchases during the period.

At September 30, the company reported $144 million of cash and $55 million of debt borrowed under a total facility of $300 million.

CTS’s full-year assumptions include continued growth in diversified end markets and flat to slightly lower light-vehicle production, partly offset by commercial-vehicle volumes. The company expects an effective tax rate of 20% to 22%, excluding discrete items, and said foreign-exchange movements provided an approximately $0.04 benefit to third-quarter earnings per share.

The outlook assumes current market conditions continue. CTS said it is monitoring geopolitical conflicts, tariff changes, the future of the USMCA, and inflation in metals and petroleum-based products. Other identified uncertainties include supply-chain disruptions, rare-earth and mineral availability, pricing pressure, customer concentration, acquisition integration, government contract funding, cybersecurity incidents and foreign-exchange volatility.