CTS Corporation 2026 年第三季財報電話會議：利潤率創新高並上調財測指引

重點摘要

• 2026 財年第三季銷售額年增 5%、季增 3% 至 1.496 億美元，主要受惠於多元化終端市場成長 7% 以及交通運輸市場成長 2%。
• 調整後毛利率創下 42.2% 的歷史新高，年增 330 個基點。調整後 EBITDA 利潤率上升約 90 個基點至 24.7%。
• 調整後稀釋每股盈餘 (EPS) 由 2025 財年第三季的 0.60 美元增至創紀錄的 0.77 美元。匯率變動貢獻每股約 0.04 美元。
• 多元化終端市場佔銷售額的 60%。其中醫療業務營收成長 21% 至 2,700 萬美元，工業業務營收成長 7% 至 4,000 萬美元。
• 在假設當前市場狀況持續的前提下，CTS 上調 2026 財年指引，預計銷售額為 5.8 億美元至 5.9 億美元，調整後稀釋每股盈餘為 2.78 美元至 2.88 美元。
• 併購 Millar 為 CTS 每年增加約 3,000 萬美元營收，並拓展 CTS 在醫療、工業與先進壓力感測領域的佈局。管理層預期該交易將在 2027 財年下半年帶來每股盈餘綜效。

核心財務數據

外幣匯率變動使單季銷售額增加約 50 萬美元，並為調整後毛利率帶來約 140 萬美元的正面效益。

業務與營運表現

醫療業務

醫療業務營收年增 21% 至 2,700 萬美元，但主要受訂單時程影響，季減 4%。用於先進診斷與治療處置的感測與致動技術需求呈現廣泛成長。

醫療業務的訂單出貨比為 0.66。CTS 在各區域植入式心律調節器、超音波診斷及治療應用領域皆取得新訂單。

航太與國防

航太與國防業務銷售額為 2,400 萬美元，年減 7%，但季增 30%。在政府合約訂單與計畫預算支持下，訂單出貨比達到 1.91。

CTS 擴大了用於美國海軍水下作戰應用的關鍵感測解決方案量產規模。公司亦持續拓展至用於海軍聲納、水下作戰與安全通訊的高價值感測解決方案與整合子系統。

工業業務

工業業務銷售額年增 7%、季增 1% 至 4,000 萬美元。該部門訂單出貨比為 1.36，並在工業印刷、資料中心、冷凍設備、暖通空調 (HVAC) 系統及工業自動化領域取得設計獲納。

CTS 新增了一家工業蒸汽與冷凝系統溫度感測的客戶。管理層預計自動化、互聯性、數位化、資料中心應用與能源效率將持續對需求提供支撐。

交通運輸

交通運輸銷售額年增 2% 至 6,000 萬美元。溫和成長包含商用車市場改善，而輕型車市場在本季則持平至略為下滑。

新取得的訂單涵蓋腳踏控制與感測應用。CTS 透過日本 OEM 廠商打入座椅軌道市場，並將地板式踏板業務拓展至中國。季末已簽約總業務量約為 12 億美元。

針對渦輪智慧致動器，CTS 目標在 2027 年年中左右取得更多引擎平台的關鍵認證。管理層表示，獲得認證後的一至兩個季度即可開始出貨。

Millar 併購案

CTS 以約 5,000 萬美元現金收購 Millar。預計受購業務每年將帶來約 3,000 萬美元營收，並為 CTS 補強壓力、化學與電化學感測能力以及導管相關技術。

管理層表示，Millar 預計將有助提升 CTS 的毛利率。其 EBITDA 貢獻將為正值，但初期可能無法提升 EBITDA 利潤率。隨著推動營收成長與綜效發揮，CTS 預計將在 2027 財年下半年實現 EPS 成長。

管理層展望指引

在假設當前市場狀況持續的前提下，CTS 上調 2026 財年全年展望：

管理層預計多元化市場需求將保持穩健。醫療動能將受惠於 Millar，航太與國防營收在積壓訂單支撐下預計第四季維持強勁，工業需求則預計保持健全。

在關稅、地緣政治及消費者需求不確定的背景下，管理層預測全球輕型車產量將持平至小幅下滑。

風險與關注事項

• 由於第三季受惠於異常有利的終端市場組合、專案時程與匯率因素，管理層預計獲利能力在未來幾個季度將趨於正常化。
• 醫療業務預訂受訂單時程影響，導致訂單出貨比為 0.66。
• 航太與國防訂單可能不平均，主因計畫資金與合約授予常以大額分批方式下達。
• 關稅、地緣政治狀況及消費者需求不確定性仍是交通運輸市場的風險因素。
• 渦輪智慧致動器的出貨量部分取決於客戶在 CTS 與競爭對手之間的採購配額分配，因此客戶的產量並不直接轉換為 CTS 的出貨量。
• Millar 存在一定程度的客戶集中度風險，不過管理層表示，該併購案不會實質改變 CTS 的整體客戶集中度輪廓，也不會使其進入最大客戶名單之列。

分析師問答亮點

• Millar 獲利能力：管理層預計此併購案將改善合併毛利率。EBITDA 貢獻將為正值，但初期可能無法提升整體 EBITDA 利潤率，而 EPS 綜效預計將在 2027 財年下半年顯現。
• 併購融資：CTS 完全以現金支付 Millar 交易，且預期受購業務的營運結構不會發生劇烈變化。
• 國防積壓訂單：營收通常根據完工百分比隨時間認列。健全的積壓訂單為第四季提供支撐，但未來動能仍取決於額外的預算撥付。
• 毛利率永續性：管理層預計未來幾個季度的毛利率將保持穩健，但提醒第三季 42.2% 的結果受惠於異常有利的產品組合，短期內未必能重現。
• 資本配置：CTS 在本季以約 340 萬美元買回 57,000 股股票，授權實施的買回額度尚餘 7,500 萬美元。

電話會議完整逐字稿

完整財報電話會議逐字稿

管理層陳述

Operator

Hello, everyone. Thank you for joining us, and welcome to CTS Corporation's Third Quarter 2026 Earnings Call.

[Operator Instructions]

I will now hand the conference over to Pratik Trivedi. Pratik, please go ahead.

Pratik Trivedi

Good morning, and thank you for joining us. We delivered a strong third quarter with revenue growing 5% to $150 million. Our diversified end markets increased 7% year-over-year and represented 60% of total sales. Strong execution drove record profitability and robust cash generation with gross margin of 42.2%, adjusted EBITDA margin of 24.7% and adjusted diluted EPS of $0.77. While transportation sales increased modestly, continued growth across our diversified end markets enabled strong financial results and improved the quality of our earnings.

As announced last Friday, we are excited about the acquisition of Millar, a highly complementary business that strengthens our position in diversified end markets, primarily medical, and expands our portfolio in advanced pressure sensing technologies.

Ashish Agrawal, our CFO, will take us through the safe harbor statement. Ashish?

Ashish Agrawal

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 today and more information can be found in the company's SEC filings.

To the extent that today's discussion refers to any non-GAAP measures under Regulation G, the required explanations and reconciliations are available with today's earnings press release and the supplemental slide presentation, which can be found in the Investors section of the CTS website.

I will now turn the discussion back over to Pratik.

Pratik Trivedi

Thank you, Ashish. We finished the third quarter with sales of $150 million, representing a 5% increase compared to the third quarter of 2025 and up 3% sequentially from the second quarter. Our diversified end markets were up 7% year-over-year, while transportation sales were up 2%. Diversified end market sales were 60% of overall company revenue in the quarter, up from 59% in the prior year period.

For 2026 year-to-date, diversified sales were up 12% and transportation sales remained flat over the same period last year. Our book-to-bill ratio for the third quarter was 1.18, reflecting sustained customer demand across our portfolio. Diversified bookings were particularly strong with a book-to-bill of 1.3.

We added one new customer in the industrial end market and one in the transportation end market. The strength of our operational execution and favorable product mix was evident as we expanded gross margin to a record 42.2%, up 330 basis points compared to the third quarter of 2025.

Adjusted EBITDA margin reached 24.7%, an improvement of approximately 90 basis points year-over-year. Third quarter adjusted diluted earnings were a record $0.77 per share, up from $0.60 in the third quarter of 2025. We maintained strong cash generation, supporting our balanced capital allocation approach that includes strategic investments in growth and returning cash to shareholders. Ashish will add further color on our financial performance later in today's call.

The recently completed acquisition of Millar represents another important step in our strategy to reshape CTS towards a more diversified portfolio of high-value differentiated technologies serving attractive end markets. The acquisition meaningfully increases our exposure to medical and industrial markets while expanding our capabilities into pressure, chemical and electrochemical sensing and differentiated catheter-based technologies. Millar's vertically integrated capabilities, spanning design, microfabrication and precision manufacturing enable differentiated solutions for demanding applications.

Beyond the strategic fit, we see compelling opportunities to accelerate growth by leveraging complementary technologies, expanding customer relationships and bringing CTS' broader engineering and commercial capabilities to the Millar platform. We expect Millar to generate revenues of approximately $30 million on an annual basis. The acquisition is expected to be accretive in the second half of 2027.

The medical end market continued to be a significant growth driver in the third quarter, generating revenue of $27 million, an increase of 21% year-over-year and a decrease of 4% sequentially, mainly due to timing of orders. Performance was fueled by broad-based demand across our sensing and actuation technologies, particularly in applications supporting advanced diagnostics and therapeutic treatments.

New business wins were impacted by timing of orders in the quarter, resulting in a book-to-bill ratio of 0.66. During the quarter, we had key wins in implantable pacemaker applications, ultrasound diagnostics and therapeutic applications across all regions. We continue to partner with leading global medical OEMs on next-generation programs across diagnostic imaging, therapeutics and several emerging applications. These opportunities, combined with favorable demographics and continued medical innovation, reinforce our confidence in the long-term growth of the market.

Aerospace and defense sales were $24 million in the third quarter, 7% below prior year, but 30% higher quarter-over-quarter, reflecting the flow of program funding and government contract orders. Orders remained very healthy as reflected in our 1.91 book-to-bill ratio, providing strong support for future growth. We continue to move up the value chain, expanding from components to higher-value sensing solutions and integrated subsystems for naval sonar, undersea warfare and secure communications applications.

During the quarter, we achieved an important win by successfully scaling production of a critical sensing solution for a U.S. Navy undersea warfare application. Increasing investments in traditional defense infrastructure as well as our customer engagements in modern warfare applications position us well for the long-term growth in this end market. Our industrial end market continued its strong momentum in the third quarter with sales of $40 million, increasing 7% year-over-year and 1% sequentially, further extending the recovery trend that began in 2025. Growth was broad-based across OEM customers and distribution partners and bookings remained healthy with a book-to-bill ratio of 1.36.

During the quarter, we secured multiple design wins across a diverse set of applications, including distribution components, industrial printing, data center applications, refrigeration, HVAC systems and industrial automation. We added one new customer during the quarter, expanding our presence for temperature sensing in industrial steam and condensate systems.

Looking ahead, we expect industrial demand to remain healthy, supported by favorable secular trends, including data center applications, automation, connectivity, digitalization and the increasing focus on energy efficiency. These trends continue to expand the addressable market for our industrial portfolio, positioning us well for sustained growth.

Transportation sales in the third quarter were $60 million, up 2% versus the prior year and up 1% sequentially. We secured important new business wins across our transportation portfolio, particularly in foot controls and sensing applications. These wins expand our presence across global vehicle platforms, establish our entry into the seat track market with Japanese OEMs and extend our floor-hinged pedal business into China, creating additional opportunities for future growth.

Total booked business was approximately $1.2 billion at the end of the quarter. We added one new Tier 1 customer during the quarter. We continue to build momentum around our e-brake technology with multiple customer opportunities progressing across future hybrid and electric vehicle platforms. Positive customer feedback, continued product development and upcoming vehicle demonstrations are building customer momentum and positioning e-brake for broader adoption.

Turning to the outlook for 2026. For our diversified end markets, demand is expected to remain solid. In medical, we see continued momentum, especially with the acquisition of Millar. In aerospace and defense, revenue is expected to remain strong in the fourth quarter given our robust order backlog. In industrial, OEM and distribution demand is expected to remain healthy. Across transportation markets, global light vehicle production volumes are forecasted to be flat to modestly down given ongoing tariff, geopolitical and consumer demand uncertainties.

We continue to closely monitor and evaluate the tariff and geopolitical environment. Our focus remains on agility in adapting to cost and price adjustments in close collaboration with our customers and suppliers. Assuming the continuation of current market conditions for the full year 2026, we are raising our guidance with sales now expected in the range of $580 million to $590 million and adjusted diluted EPS in the range of $2.78 to $2.88.

Now I'll turn it over to Ashish, who will walk us through the financial results in more details.

Ashish Agrawal

Thank you, Pratik. Third quarter sales were $149.6 million, up 5% compared to the third quarter of 2025 and up 3% sequentially from the second quarter of 2026. Sales to diversified end markets increased 7% year-over-year, while sales to transportation customers were up 2%. Foreign currency changes impacted sales favorably by approximately $0.5 million in the quarter.

Our adjusted gross margin was a record 42.2%, up 330 basis points compared to the third quarter of 2025 and up approximately 70 basis points sequentially. The year-over-year improvement was driven by operational execution, a favorable impact of approximately $1.4 million from foreign currency changes and an above-normal favorable impact of end market mix driven by timing of certain projects. We expect some normalization in profitability in the next few quarters.

Gross margin from the Millar acquisition is expected to be accretive to our overall gross margin. Adjusted EBITDA margin was 24.7%, an improvement of approximately 90 basis points versus the prior year period. Our effective tax rate for the quarter was 18.9%, excluding discrete items. For the full year, we continue to expect our tax rate to be in the range of 20% to 22%, excluding discrete items. Adjusted earnings for the third quarter were a record $0.77 per diluted share, up from $0.60 per diluted share in the third quarter of 2025. Our EPS this quarter includes foreign currency favorability of approximately $0.04.

Moving to cash generation and the balance sheet. We generated strong operating cash flow of $44 million in the third quarter. Capital expenditures were $2.4 million in the quarter and free cash flow was approximately $41 million. Our balance sheet strengthened further with a cash balance of $144 million and borrowings of $55 million at the end of the quarter. In October, we deployed approximately $50 million in cash towards the acquisition of Millar.

During the quarter, we repurchased 57,000 shares of CTS stock for approximately $3.4 million. We have $75 million remaining under our current share repurchase program. We remain focused on strong cash generation and disciplined capital allocation and will continue to support organic growth, strategic acquisitions and returning cash to shareholders.

This concludes our prepared comments. We would like to open the line for questions at this time.

Operator

[Operator Instructions] Your first question comes from the line of Gary Prestopino with Barrington.

分析師問答

Gary Prestopino

I wanted to ask you a question on Millar. You kind of answered it partially. The gross margin is going to be accretive. What about the adjusted EBITDA margin? Is that accretive as well?

Ashish Agrawal

So, Gary, we are talking about on the call, like you heard us say, the gross margin is accretive. The EBITDA will be positive, obviously, but maybe not quite accretive at the beginning. But as we work through the synergies and sales growth in the business, we expect it to be very healthy as we move forward. And we also expect EPS accretion in the second half of 2027.

Gary Prestopino

Could you maybe talk about what their historic sales growth rate has been and where you think you can take it and what you have to do to get the growth higher?

Ashish Agrawal

So, Gary, the historical sales, we generally don't get into that with the acquisitions. What I would say to you is that they have a very strong play in advanced medical treatment with a strong base amongst the customers that are providing that kind of facilities. And we expect good growth. Their technology is well respected in the industry. And the primary driver for us to be looking at Millar is to drive revenue growth as we look ahead.

Operator

Your next question comes from the line of Jaeson Schmidt with Lake Street.

Jaeson Schmidt

Just sticking with the acquisition, curious if you could comment if Millar has any significant customer concentration?

Ashish Agrawal

Mostly in the medical market, Jaeson, we expect -- they've got a good profile of customers. They do have some customer concentration. But when you look at the total CTS level, that concentration will not look materially different from what we have today. It will not make it to our top customer list.

Jaeson Schmidt

Okay. That's helpful. And then just as a follow-up, really nice to see the rebound in the transportation market. Curious if that growth here in Q3 was driven by 1 or 2 particular customers or if it was more broad-based?

Pratik Trivedi

Jaeson, I would say that the growth in Q3, which was a very moderate growth, was a combination of some growth in our commercial vehicle segment, but we still -- the automotive or the light vehicle market was still pretty much flat to slightly down for the quarter.

Operator

Your next question comes from the line of John Franzreb with Sidoti & Co.

John Franzreb

I guess I just want to go back to the Millar and the financing of the deal. Did I hear you properly and that was entirely cash? Or did you borrow in addition to doing that?

Ashish Agrawal

It was entirely cash, John.

John Franzreb

And another good backlog number in A&D. What does the delivery schedule look like in that business? How should we think about that on a go-forward basis?

Ashish Agrawal

So, John, in defense, we generally have an over time revenue recognition approach where we recognize revenue based on percentage of completion. So Pratik already mentioned, we have a healthy backlog going into Q4. It positions us well, and we want to see the momentum continue with additional funding.

Pratik Trivedi

Maybe just to add, it's also another reflection of the lumpiness that we've described in the previous quarters around that when we get the orders, we get in lumps and then there are quarters where the book-to-bill is below 1. So it's just a reflection of that timing of those orders.

John Franzreb

Right. I know the volatility. I just wanted to see if I could kind of expand and maybe some clarity how to model it all. And just quickly, does the acquisition require any kind of consolidation into the business or it's going to be run as a stand-alone? Does it change the spend rate maybe on your R&D?

Ashish Agrawal

No, we're not expecting any sudden changes to the structure or anything, John. It's a great business. We are excited about the team joining us. They've got a good talent pool that is running the business today, and we hope to leverage them to leverage their capabilities and our capabilities to drive growth. From an integration standpoint, we will look at some things we do very quickly in terms of cash transactions and things like that. Some things we take a little bit longer time to make sure that we are getting the right balance between cultural integration as well as systems and processes and things like that. But we are not expecting any drastic changes in how the business is being run.

Operator

Your next question comes from the line of Hendi Susanto with Gabelli Funds.

Hendi Susanto

I would like to congratulate on a very strong gross margin, 42.2%. And then any puts and takes? I know that margin is influenced by the mix. So the diversified end markets now is already like 60%. Any puts and takes that we should keep in mind when we think of gross margin coming ahead?

Ashish Agrawal

Yes. Hendi, in the prepared comments, we mentioned that we have an unusually favorable mix even within the diversified markets based on the timing of certain projects. We do expect good gross margins in the next few quarters, but maybe not quite at the same level as the 42%. We were very happy with what we were able to deliver. It reflects strong performance by our global teams on execution and also growth in the right areas. So in the mid- to long term, we will look to continue expanding gross margins. But from quarter-to-quarter, there can be changes that hold us back from straight up north movement every single quarter.

Hendi Susanto

I see. And then, Pratik, do you have any update on the turbo smart actuator business in terms of customer allocation?

Pratik Trivedi

Hendi, so, as it relates to the actuator, we continue to work towards getting approvals on additional engine platforms. And while our customer production provides a pretty important demand indicator, the volumes can vary based on the sourcing mix between CTS and the competitor. So as a result, the production volumes do not necessarily translate directly into comparable changes for CTS volumes.

Hendi Susanto

And Pratik, may I ask further, like, when you mentioned working towards like new products, what kind of timing are we looking?

Pratik Trivedi

So we are working on the products to qualify additional engine platforms, Hendi, and we are looking at somewhere around the middle of 2027 for some critical approvals.

Hendi Susanto

So approval in, let's say, like in 2027? And then how soon will, like, delivery following the approval process?

Ashish Agrawal

It should be a quarter or 2 after that.

Pratik Trivedi

A quarter or 2 after that, Hendi.

Operator

There are no further questions at this time. I will now turn the call back to Pratik Trivedi for closing remarks.

Pratik Trivedi

Thank you all for your time today. I am proud of our team's performance this quarter, and the results reflect strong execution of our strategy of driving sustainable organic growth, diversifying our portfolio, delivering consistent operational execution and deploying capital strategically. The acquisition of Millar represents another important step in our portfolio transformation, expanding our presence in the medical and industrial end markets. The CTS business system provides the foundation for how we execute these priorities with a focus on growth, operational rigor, employee engagement and supporting our communities. We look forward to updating you on our fourth quarter and full year results in February.

Thank you for joining us today.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.