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Financial Data and Key Metrics Changes - Sales for the third quarter were $143 million, up 8% from $132 million in the same period last year [4][16] - Adjusted diluted EPS were $0.60 per share, down from $0.61 in the third quarter of 2024, primarily due to unfavorable tax impacts [5][17] - Adjusted gross margin was 38.9%, an increase of 66 basis points year-over-year [16][17] - Operating cash flow generated was $29 million, compared to $35 million in the third quarter of 2024 [18] Business Line Data and Key Metrics Changes - Diversified end market sales increased by 22% year-over-year, accounting for 59% of overall company revenue [4][5] - Transportation sales decreased by 7% from the same period last year, totaling $58.5 million [10][16] - SideQuest revenues increased to $8.8 million, with bookings up 29% from the prior year [8][16] Market Data and Key Metrics Changes - Book-to-bill ratio for the third quarter was slightly above 1, compared to marginally below 1 in the third quarter of 2024 [4] - Aerospace and defense sales rose by 23% year-over-year [7] - Industrial market sales were up 21% compared to the prior year, with a 9% sequential increase [9][49] Company Strategy and Development Direction - The company is transitioning from a component supplier to a supplier of sensors, transducers, and subsystems, validated by recent naval defense contract awards [8] - Focus remains on strong cash generation, appropriate capital allocation, and supporting organic growth and strategic acquisitions [19] - The company aims to enhance its growth profile through increased volumes in portable ultrasound diagnostics and therapeutics [7][12] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth prospects for medical, aerospace, and defense markets despite mixed signals in the transportation sector [25][49] - The company anticipates continued softness in commercial vehicle demand but expects strong performance in diversified end markets [14][12] - Management is closely monitoring the impact of tariffs and geopolitical factors while adapting to cost and price adjustments [14][51] Other Important Information - The company repurchased 400,000 shares for approximately $17 million during the quarter, returning $44 million to shareholders through dividends and buybacks year-to-date [18][19] - The company expects to maintain momentum in SideQuest revenues through the end of the year, with additional platform awards anticipated [8][42] Q&A Session Summary Question: Guidance on revenue and EPS - Management raised the midpoint on revenue guidance but lowered EPS guidance due to tax impacts from recent U.S. tax legislation [23][24] Question: Transportation production rates for 2026 - Transportation market signals are mixed, with some OEMs optimistic and others cautious; however, solid bookings were noted [25] Question: Gross margin contributions by end market - Margins are good across diversified end markets, with transportation trailing behind but still performing well [26][27] Question: Tax impact in 2026 - The adverse tax impact is expected to continue into 2026, with a projected tax rate in the low 20% range [37][38] Question: Inventory levels in transportation - Days of supply for light vehicles are around 50 days, which is considered normal; no concerns were raised [40][41] Question: SideQuest revenue contributions - SideQuest is expected to show seasonal revenue patterns, with a positive outlook for future awards [42] Question: Operating expenses increase - The increase in operating expenses was primarily due to a $4.2 million reserve increase and higher equity-based compensation [43]

Financial Data and Key Metrics Changes - The company reported third-quarter sales of $143 million, an increase of 8% from $132 million in the same quarter of 2024 [4] - Adjusted diluted EPS for the third quarter was $0.60, down from $0.61 in the same period last year, primarily due to unfavorable impacts from recent U.S. tax legislation [5][17] - Adjusted gross margin improved to 38.9%, up 66 basis points year-over-year [16][17] - Operating cash flow for the third quarter was $29 million, compared to $35 million in the same quarter of 2024 [18] Business Line Data and Key Metrics Changes - Diversified end market sales increased by 22% year-over-year, accounting for 59% of overall company revenue, up from 52% in the previous year [4][5] - Medical end market sales rose by 22% compared to the same period in 2024, with bookings up 8% [5][7] - Aerospace and defense sales increased by 23% year-over-year [7] - Transportation sales decreased by 7% from the same period last year, attributed to softness in commercial vehicle products [9][10] Market Data and Key Metrics Changes - The book-to-bill ratio for the third quarter was slightly above 1, compared to marginally below 1 in the same quarter of 2024 [4] - Industrial and distribution sales showed a 9% sequential increase and a 21% year-over-year increase, indicating a steady recovery [9][46] - The North American light vehicle market is expected to be in the 15 million unit range, with European production forecasted at 16 million units and China at 30 million units [12] Company Strategy and Development Direction - The company aims to transition from a component supplier to a supplier of sensors, transducers, and subsystems, as validated by recent naval defense contract awards [8] - The focus remains on strong cash generation, appropriate capital allocation, and supporting organic growth and strategic acquisitions [18][19] - The company is monitoring the tariff and geopolitical environment while adapting to cost and price adjustments [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth prospects for medical, aerospace, and defense markets, despite mixed signals from the transportation sector [24][46] - The company anticipates continued strength in therapeutic products, with expectations for increased volumes in 2026 [7][11] - The adverse tax impact from recent U.S. tax legislation is expected to persist into 2026, with a projected tax rate in the low 20% range [35][36] Other Important Information - SideQuest revenues increased to $8.8 million in the third quarter, with bookings up 29% year-over-year [8][16] - The company repurchased 400,000 shares for approximately $17 million during the quarter, returning a total of $44 million to shareholders through dividends and buybacks year-to-date [18] Q&A Session Summary Question: Guidance on revenue and EPS - Management raised the midpoint on revenue guidance but lowered the midpoint on EPS guidance due to tax impacts and mixed market signals [22][23] Question: Transportation customers' production rates for 2026 - The transportation market is mixed, with some OEMs optimistic and others cautious, but solid bookings were noted [24] Question: Gross margin contribution by end markets - Margins are good across diversified end markets, with transportation trailing behind [25][26] Question: Tax impact in 2026 - The adverse tax impact from U.S. tax legislation is expected to continue, with a similar tax rate projected for 2026 [35][36] Question: Inventory levels in transportation - Days of supply for light vehicles are around 50 days, which is considered normal, with no immediate concerns [38] Question: SideQuest revenue contribution - Revenue from SideQuest is expected to show seasonality, with a step-up in revenues anticipated [39] Question: Operating expenses increase - The increase in operating expenses is primarily due to a $4.2 million reserve increase and higher equity-based compensation [40]

Financial Data and Key Metrics Changes - The company reported sales of $143 million for Q3 2025, an increase of 8% from $132 million in Q3 2024 [4] - Adjusted diluted EPS for Q3 2025 was $0.60, down from $0.61 in Q3 2024, primarily due to unfavorable impacts from recent U.S. tax legislation [5][16] - Adjusted gross margin improved to 38.9%, up 66 basis points year-over-year [15] - Operating cash flow for Q3 2025 was $29 million, compared to $35 million in Q3 2024 [17] Business Line Data and Key Metrics Changes - Diversified end market sales increased by 22% year-over-year, accounting for 59% of overall company revenue [4][5] - Transportation sales decreased by 7% compared to the same period last year, totaling $58.5 million [10] - SideQuest revenues rose to $8.8 million, with bookings up 29% from the prior year [8][15] Market Data and Key Metrics Changes - Aerospace and defense sales increased by 23% year-over-year [7] - Medical end market sales were up 22% compared to Q3 2024, with bookings increasing by 8% [5][6] - Industrial market sales improved by 21% year-over-year, with a 9% sequential increase [9] Company Strategy and Development Direction - The company aims to transition from a component supplier to a supplier of sensors, transducers, and subsystems, as evidenced by recent naval defense contract awards [8] - The focus remains on strong cash generation, appropriate capital allocation, and supporting organic growth and strategic acquisitions [17] - The company is monitoring the tariff environment and adapting to cost and price adjustments in collaboration with customers and suppliers [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth prospects for medical, aerospace, and defense markets, despite mixed signals from the transportation sector [25][48] - The company anticipates continued strength in therapeutic products, while diagnostic ultrasound demand remains soft [11][50] - Future revenue guidance was narrowed to a range of $535 to $545 million, with adjusted diluted EPS expected between $2.20 and $2.25 [14] Other Important Information - The company repurchased 400,000 shares for approximately $17 million during the quarter, returning a total of $44 million to shareholders through dividends and buybacks year-to-date [17] - The balance sheet remains strong with a cash balance of $110 million and long-term debt of $91 million [17] Q&A Session Summary Question: Guidance on revenue and EPS - Management raised the midpoint of revenue guidance while lowering EPS guidance due to tax impacts and mixed market signals [22][24] Question: Transportation customers' production rates for 2026 - The transportation market outlook is mixed, with some OEMs optimistic and others cautious, but solid bookings were noted [25] Question: Gross margin contribution by end markets - Margins are good across diversified end markets, with medical, industrial, aerospace, and defense performing well, while transportation lags [26][27] Question: Tax impact in 2026 - The adverse tax impact from U.S. legislation is expected to continue into 2026, with a projected tax rate in the low 20% range [37][38] Question: SideQuest revenue contribution - SideQuest is expected to show seasonal revenue patterns, with a positive outlook for future awards and revenue growth [42] Question: Operating expenses increase - The increase in operating expenses is primarily due to a $4.2 million reserve increase and higher equity-based compensation [43]

Core Insights - CTS reported quarterly earnings of $0.6 per share, missing the Zacks Consensus Estimate of $0.61 per share, and down from $0.63 per share a year ago, representing an earnings surprise of -1.64% [1] - The company posted revenues of $142.97 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 4.82%, compared to year-ago revenues of $132.42 million [2] - CTS shares have declined approximately 19.5% since the beginning of the year, contrasting with the S&P 500's gain of 16.9% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.61 on revenues of $133.14 million, and for the current fiscal year, it is $2.24 on revenues of $530.61 million [7] - The estimate revisions trend for CTS was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Electronics - Miscellaneous Components industry, to which CTS belongs, is currently in the top 12% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Q3 2025 revenue reached $143 million, reflecting an 8% increase compared to Q3 2024[7] - Adjusted Gross Margin was 38.9% in Q3 2025, a 66 bps increase from Q3 2024[7, 38] - Adjusted Diluted EPS was $0.60 in Q3 2025, a (2)% decrease compared to Q3 2024[7] Segment Performance - Diversified end markets (industrial, aerospace & defense, and medical) saw a 22% revenue increase year-over-year and accounted for 59% of total revenue[10, 38] - Transportation end market revenue decreased by (7)% year-over-year due to lower commercial vehicle sales[10, 38] - Total booked business in transportation was approximately $1 billion at the end of Q3 2025[25] End Market Highlights - Medical Q3 sales were $22 million, up 22% year-over-year, with bookings up 8%[17] - Aerospace & Defense Q3 sales were $25 million, up 23% year-over-year, with bookings up 29%[17] - Industrial Q3 sales were $37 million, up 21% year-over-year, with bookings up 29%[25] Cash Flow and Balance Sheet - Generated $29 million in operating cash flow in Q3 2025[10] - Free cash flow YTD 2025 was $60 million[40] - Cash returned to shareholders YTD 2025 totaled $44 million[40]

Financial Performance - Sales for Q3 2025 were $143 million, an 8% increase year-over-year, with sales to diversified end markets rising 22%[6] - Net income for Q3 2025 was $14 million, representing 9.6% of sales, compared to $18 million or 13.7% of sales in Q3 2024[6] - Diluted EPS for Q3 2025 was $0.46, down from $0.59 in Q3 2024, while adjusted diluted EPS was $0.60, compared to $0.61 in the prior year[6] - Adjusted gross margin improved to 38.9% in Q3 2025 from 38.2% in Q3 2024, while adjusted EBITDA margin decreased to 23.8% from 24.4%[6] - Net earnings for the three months ended September 30, 2025, were $13.7 million, down from $18.1 million in the same period of 2024, indicating a decrease of 24.3%[23] - Adjusted net earnings for the nine months ended September 30, 2025, were $48.2 million, or $1.61 per share, compared to $49.7 million, or $1.62 per share for the same period in 2024, indicating a slight decrease of 3.0%[24] - The company reported net earnings as a percentage of net sales of 9.6% for the three months ended September 30, 2025, compared to 13.7% for the same period in 2024[24] Guidance and Projections - CTS updated its 2025 sales guidance to a range of $535-$545 million and adjusted diluted EPS guidance to $2.20-$2.25[4] Cash Flow and Working Capital - Operating cash flow for Q3 2025 was $29 million, down from $35 million in Q3 2024[6] - Free cash flow for the three months ended September 30, 2025, was $24.2 million, compared to $31.5 million for the same period in 2024, reflecting a decrease of 23.2%[34] - Operating cash flow as a percentage of net earnings was 212% for the three months ended September 30, 2025, up from 189% in the same period of 2024[34] - Controllable working capital as a percentage of annualized sales was 16.1% for the three months ended September 30, 2025, down from 18.4% in the same period of 2024[31] Assets and Liabilities - Cash and cash equivalents increased to $110.3 million as of September 30, 2025, up from $94.3 million at the end of 2024[17] - Total assets rose to $790.4 million as of September 30, 2025, compared to $765.4 million at the end of 2024[17] - Net accounts receivable as of September 30, 2025, was $85.9 million, a slight decrease from $86.4 million in 2024[31] - Net inventory as of September 30, 2025, was $54.2 million, down from $56.0 million in 2024[31] Expenses and Charges - The company incurred an extraordinary charge of $4.2 million related to an EPA past cost recovery claim in Q3 2025[6] - CTS incurred restructuring-related charges of $0.2 million for the three months ended September 30, 2025, and $0.7 million for the nine months ended September 30, 2025[21] - Depreciation and amortization expense for the three months ended September 30, 2025, was $8.8 million, compared to $8.0 million in the same period of 2024[37] - Stock-based compensation expense for the three months ended September 30, 2025, was $1.2 million, down from $1.4 million in the same period of 2024[37] Strategic Focus - CTS emphasized diversification as a strategic priority to drive growth and margin expansion[3] - The adjusted gross margin for the twelve months ended December 31, 2023, was 36.5%, compared to 35.9% for the previous year[21] Sales Performance - Net sales for the three months ended September 30, 2025, were $143.0 million, an increase from $132.4 million in the same period of 2024, representing a growth of 4.5%[22] - Net sales for the nine months ended September 30, 2025, reached $404.0 million, an increase from $388.3 million in the same period of 2024[35] - The company reported a net sales figure of $514.8 million for the twelve months ended December 31, 2023, down from $586.9 million in 2022, reflecting a decline of 12.3%[22] - Annualized sales for the three months ended September 30, 2025, were $571.9 million, an increase from $529.5 million in the same period of 2024[31] Adjustments and Corrections - Total adjustments to reported operating earnings for the nine months ended September 30, 2025, amounted to $3.5 million[22] - Total pretax adjustments to reported net earnings for the three months ended September 30, 2025, amounted to $4.4 million, or $0.15 per share[24] - The company updated certain previously furnished 2024 amounts due to immaterial errors identified[37]

Core Insights - CTS Corporation reported strong growth in the third quarter of 2025, with sales increasing by 22% year-over-year in diversified end markets, while overall sales rose by 8% to $143 million [2][7] - The company emphasized diversification as a strategic priority to enhance growth and margin expansion [2] - For 2025, CTS has narrowed its sales guidance to a range of $535-$545 million and adjusted diluted EPS to between $2.20 and $2.25, assuming current market conditions persist [3] Financial Performance - Net income for Q3 2025 was $14 million, representing 9.6% of sales, which included a $4.2 million charge related to an EPA claim [7] - Adjusted diluted EPS was $0.60, slightly down from $0.61 in Q3 2024, while diluted EPS decreased to $0.46 from $0.59 in the same period [7][25] - Adjusted gross margin improved to 38.9% from 38.2% year-over-year, while adjusted EBITDA margin decreased to 23.8% from 24.4% [7][23] Market Segments - Sales to diversified end markets, which include industrial, aerospace & defense, and medical sectors, saw a significant increase of 22% [7][8] - Conversely, sales to the transportation end market experienced a decline of 7% [7] Cash Flow and Expenses - Operating cash flow for Q3 2025 was reported at $29 million, down from $35 million in Q3 2024 [7] - The company incurred selling, general, and administrative expenses of $27.2 million, up from $22.5 million year-over-year [7][12] Balance Sheet Highlights - As of September 30, 2025, total assets were $790.4 million, an increase from $765.4 million at the end of 2024 [15] - Current assets rose to $276.2 million, compared to $242.2 million in the previous year [15] Future Outlook - CTS Corporation's management remains optimistic about the company's growth trajectory, driven by its focus on diversification and solid execution in challenging market conditions [2][3]

Core Viewpoint - CTS Corporation is set to release its third quarter 2025 earnings on October 28, 2025, at 8:00 a.m. (ET) [1] Earnings Release Information - The earnings conference call will take place on October 28, 2025, at 10:00 a.m. (ET) [2] - Dial-in numbers for the conference call include +1-833-470-1428 (Toll-Free) and +1-646-844-6383 (Local) for U.S. callers, with additional global dial-in numbers available for international participants [2] Webcast Details - A live audio webcast of the conference call will be accessible from the Investors section of CTS Corporation's website and will be archived for one year [3] Company Overview - CTS Corporation is a leading designer and manufacturer of products that Sense, Connect, and Move, producing sensors, actuators, and electronic components across North America, Europe, and Asia [4] - The company serves various markets including aerospace/defense, industrial, medical, and transportation [4]

Core Insights - CTS Corporation has launched COBROS, a new platform for electric motor control that utilizes real-time, in-situ magnetic field sensing, developed over seven years of research [1][4] Group 1: Technology Overview - Traditional vector-controlled motors rely on indirect measurements for estimating the magnetic state, which involves separate sensors for rotor position and current, adding cost and complexity [2] - COBROS directly measures the magnetic fields inside the motor, eliminating the need for multiple discrete sensors, thus simplifying design and enhancing control precision [3] - The COBROS technology employs advanced magnetic sensing elements like Hall and TMR, combined with a new signal processing architecture for multidimensional decomposition of the motor's magnetic field [4] Group 2: Benefits and Applications - The introduction of COBROS allows for improved accuracy and dynamic performance in electric motor control while reducing system complexity and cost [4] - Customers in automotive, industrial, and robotic applications will benefit from enhanced efficiency, lower system costs, and simplified integration through this innovative approach [5]