CTS Corporation

Second-quarter sales were $144.8 million, up 7% year over year and up 4% sequentially. Adjusted gross margin was a record 41.5%, up 270 basis points year over year, and adjusted EBITDA margin was 25.4%, up about 240 basis points. Adjusted diluted EPS was a record $0.74, up from $0.57 last year; management said about $0.07 of the EPS benefit came from foreign currency favorability and a larger customer reimbursement. Cash from operations was $33 million, capex was $4.6 million, free cash flow was about $29 million, and the company ended the quarter with $108 million of cash and $55 million of borrowings. For 2026, CTS raised guidance to sales of $565 million to $585 million and adjusted diluted EPS of $2.55 to $2.70; the full-year tax rate is still expected to be 21% to 23% excluding discrete items.

Pratik Trivedi framed the quarter as validation of CTS’s Evolution 2030 strategy, with an emphasis on diversification, profitable growth, and stabilizing transportation while accelerating the diversified businesses. He said the company is seeing strong opportunity in medical, industrial, and aerospace and defense, and that the quarter showed the strategy is working. His tone was confident but measured, stressing disciplined execution, capacity being put in place ahead of demand, and continued focus on long-term shareholder value.

Ashish Agrawal highlighted the quarter’s operating leverage and cash generation, citing record 41.5% adjusted gross margin, 25.4% adjusted EBITDA margin, and $33 million of operating cash flow. He said FX contributed about $1.4 million to sales and about $1 million to gross margin, while foreign currency favorability and a larger customer reimbursement together added about $0.07 to EPS. He also noted ongoing work to keep tariff, precious metal, and input cost pressures broadly cost neutral, with the balance sheet ending at $108 million of cash, $55 million of borrowings, $3.5 million of share repurchases, and $78 million remaining on the buyback authorization.

Analysts focused on the sustainability of the medical ramp, the size and timing of customer reimbursements, tariff and inflation pressures, and whether transportation upside could pressure margins. Management said R&D should normalize going forward, though customer reimbursements can still fluctuate with program activity, and that medical’s capacity expansion is already in place with therapeutics expected to normalize more in the second half. On transportation, management said commercial vehicle volumes are expected to grow modestly in the second half, but gross margin on new programs can be pressured early before productivity improvements develop, and visibility on Cummins-related market share should improve toward year-end.