CTS公司2026财年第三季度业绩电话会：利润率创历史新高并上调业绩指引lg...

核心要点

• 2026财年第三季度销售额同比增长5%，环比增长3%，达到1.496亿美元，主要得益于多元化终端市场7%的增长和交通运输业务2%的增长。
• 调整后毛利率达到创纪录的42.2%，同比增长330个基点。调整后EBITDA利润率上升约90个基点至24.7%。
• 调整后稀释每股收益从2025财年第三季度的0.60美元增至创纪录的0.77美元。外汇贡献了每股约0.04美元。
• 多元化终端市场占销售额的60%。其中医疗业务收入增长21%至2700万美元，工业业务收入增长7%至4000万美元。
• 假设当前市场状况持续，CTS将其2026财年业绩指引上调至销售额5.8亿至5.9亿美元，调整后稀释每股收益为2.78至2.88美元。
• 收购Millar每年可增加约3000万美元收入，并拓展了CTS在医疗、工业和先进压力传感领域的业务。管理层预计将在2027财年下半年实现每股收益增益。

核心财务数据

外汇变动使本季度销售额增加了约50万美元，并为调整后毛利率带来了约140万美元的正面影响。

业务与经营业绩

医疗业务

医疗业务收入同比增长21%至2700万美元，但受订单下达时间影响，环比下降4%。用于先进诊断和治疗的传感及执行技术需求广泛。

医疗业务的订单出货比为0.66。CTS在所有地区的植入式起搏器、超声诊断和治疗应用领域均斩获新订单。

航空航天与国防业务

航空航天与国防业务销售额为2400万美元，同比下降7%，但环比增长30%。在政府合同订单和项目资金的支持下，订单出货比达到1.91。

CTS扩大了用于美国海军水下作战应用的关键传感解决方案的生产。公司还在向用于海军声纳、水下作战和安全通信的高价值传感解决方案及集成子系统领域扩展。

工业业务

工业业务销售额同比增长7%，环比增长1%，达到4000万美元。该板块记录了1.36的订单出货比，并在工业打印、数据中心、制冷、暖通空调（HVAC）系统和工业自动化领域赢得了设计方案（design wins）。

CTS在工业蒸汽和凝结水系统的温度传感领域新增了一家客户。管理层预计，自动化、互联性、数字化、数据中心应用和能源效率将继续支撑需求。

交通运输业务

交通运输业务销售额同比增长2%至6000万美元。温和增长包括商用车的改善，而轻型车市场在本季度持平至略有下降。

新赢订单涵盖脚踏控制和传感应用。CTS凭借日本原始设备制造商（OEM）打入座椅滑轨市场，并将地板式踏板业务扩展至中国。截至季度末，储备业务总额约为12亿美元。

针对其涡轮智能执行器，CTS的目标是在2027年中期前后获得更多发动机平台的关键批准。管理层表示，交付可能在获得批准后的一到两个季度内开始。

收购Millar

CTS支付了约5000万美元现金收购Millar。被收购业务预计每年产生约3000万美元收入，并补充了压力、化学及电化学传感能力以及基于导管的技术。

管理层表示，Millar应能提升CTS的毛利率。其对EBITDA的贡献将为正，但最初可能不会拉升EBITDA利润率。随着追求销售增长和协同效应，CTS预计将在2027财年下半年实现每股收益增益。

管理层业绩指引

假设当前市场状况持续，CTS上调了2026财年全年业绩预期：

管理层预计多元化市场需求将保持稳健。医疗业务增长动能将受益于Millar，受积压订单支撑，航空航天与国防业务收入预计在第四季度保持强劲，工业需求预计将保持健康。

在关税、地缘政治和消费者需求不确定性的影响下，管理层预测全球轻型车产量将持平至小幅下降。

风险与关注事项

• 管理层预计盈利能力将在接下来的几个季度重回常态，因为第三季度受益于特别有利的终端市场组合、项目时间节点和外汇因素。
• 医疗业务的新增订单受订单下达时间影响，导致订单出货比为0.66。
• 航空航天与国防业务的订单可能存在不均衡现象，因为项目资金和合同授予通常是大额分批下达的。
• 关税、地缘政治状况和消费者需求的不确定性仍是交通运输市场的风险因素。
• 涡轮智能执行器的出货量部分取决于客户在CTS与竞争对手之间的采购份额分配，因此客户的生产量并不直接转化为CTS的出货量。
• Millar存在一定的客户集中度，但管理层表示此次收购不会实质性改变CTS的整体客户集中度状况，也不会使其进入前几大客户名单。

分析师问答环节亮点

• Millar盈利能力：管理层预计该收购将提升综合毛利率。EBITDA贡献将为正，但最初可能无法拉升EBITDA利润率，而每股收益增益预计将在2027年下半年实现。
• 收购融资：CTS完全以现金支付了Millar交易，且预计不会对被收购业务的运营结构做出重大改变。
• 国防积压订单：收入通常根据完工百分比随时间确认。良好的积压订单为第四季度提供了支撑，但未来的增长动能取决于后续资金安排。
• 毛利率可持续性：管理层预计未来几个季度的毛利率仍将保持稳健，但同时提醒称，第三季度42.2%的成绩得益于特别有利的产品组合，可能无法立刻重演。
• 资本配置：CTS在本季度以约340万美元回购了57,000股股票，股票回购授权额度还剩余7500万美元。

业绩电话会议完整文字记录

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完整财报电话会议逐字稿

管理层陈述

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.

分析师问答

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.

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