Q1 2026 CTS Corp Earnings Call

April 29, 2026

Speaker #1: Hello everyone, thank you for joining us, and welcome to the CTS CORP 1st Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question-and-answer session.

Operator: Hello, everyone. Thank you for joining us, and welcome to the CTS Corporation Q1 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. I will now hand the conference over to Kieran O'Sullivan. Kieran, please go ahead.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, please press *1 again. I will now hand the conference over to Kieran O'Sullivan.

Speaker #1: Kieran, please go ahead.

Speaker #2: Good morning, and thank you for joining us today. I'm pleased to report a solid 1st quarter of 2026 for CTS with diversified sales up double digits as we continue to execute our diversification strategy.

Kieran O'Sullivan: Good morning, and thank you for joining us today. I'm pleased to report a solid Q1 2026 for CTS, with diversified sales up double digits as we continue to execute our diversification strategy. We also saw strong bookings momentum in the industrial and medical markets. In transportation, we see stability in revenue with modest growth in Q1. Overall, with growth in key end markets and solid execution, we believe the company is well-positioned to deliver on its strategic objectives. Ashish Agrawal, our CFO, will take us through the safe harbor statement and later through our financials. Pratik Trivedi, our COO, will provide an update on the progress in each of our end markets. Ashish?

Speaker #2: We also saw strong bookings momentum in the industrial and medical markets, in transportation we see stability in revenue, with modest growth in the 1st quarter.

Speaker #2: Overall, with growth in key end markets and solid execution, we believe the company is well positioned to deliver on its strategic objectives. Ashish Agrawal, our CFO, will take us through the safe harbor statement and later through our financials.

Speaker #2: Prateek Trivedi, our COO, will provide an update on the progress in each of our end markets. Ashish?

Speaker #3: I would like to remind our listeners that this 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.

Ashish Agrawal: I would like to remind our listeners that this 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 investor section of the CTS website. I will now turn the discussion back over to our CEO, Kieran O'Sullivan.

Speaker #3: 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.

Speaker #3: 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 investor section of the CTS website.

Speaker #3: I will now turn the discussion back over to our CEO, Kieran O'Sullivan.

Speaker #2: Thank you, Ashish. We finished the 1st quarter with sales of $139 million, representing a solid 11% increase compared to the 1st quarter of 2025.

Kieran O'Sullivan: Thank you, Ashish. We finished the Q1 with sales of $139 million, representing a solid 11% increase compared to the Q1 2025. Our diversified end markets were up 18%. Transportation sales grew 3%. Our book-to-bill ratio for the Q1 was 1.1, up 4% compared to the Q1 2025. Looking at bookings performance, industrial bookings were strong, driven by stabilized OEM demand and a recovery in distribution. Medical bookings showed robust growth driven by continued strength in diagnostics and therapeutic applications. In aerospace and defense, we continue to have a robust pipeline of opportunities even as bookings were down compared to last year, as funding on various programs is expected to improve in the H2. We added 2 new customers in the defense market.

Speaker #2: Our diversified end markets were up 18%, transportation sales grew 3%. Our book-to-bill ratio for the 1st quarter was 1.1, up 4% compared to the 1st quarter of 2025.

Speaker #2: Looking at bookings performance, industrial bookings were strong, driven by stabilized OEM demand, and the recovery in the segment showed robust growth, driven by continued strength in diagnostics and therapeutic applications.

Speaker #2: In aerospace and defense, we continue to have a robust pipeline of opportunities even as bookings were down compared to last year, as funding on various programs is expected to improve in the second half.

Speaker #2: We added two new customers in the defense market. In transportation, we secured seven new business awards including current sensing in Europe, and a larger award for foot controls with a European OEM in early April.

Kieran O'Sullivan: In transportation, we secured 7 new business awards, including current sensing in Europe and a larger award for foot controls with a European OEM in early April. We also added a new customer in the transportation market. Our operational execution was evident as we expanded gross margin by 250 basis points in Q1. We maintained strong cash flow generation, supporting our balanced capital allocation approach that includes strategic investments in growth and returning cash to shareholders. Q1 adjusted diluted earnings were $0.62 per share, up from $0.44 in Q1 2025, as we continue to focus on driving profitable growth. Ashish will add further color on our financial performance later in today's call. Turning to the outlook for 2026, for our diversified end markets, demand is expected to be solid.

Kieran O'Sullivan: In transportation, we secured seven new business awards, including current sensing in Europe and a larger award for foot controls with a European OEM in early April. We also added a new customer in the transportation market. Our operational execution was evident as we expanded gross margin by 250 basis points in Q1. We maintained strong cash flow generation, supporting our balanced capital allocation approach that includes strategic investments in growth and returning cash to shareholders. Q1 adjusted diluted earnings were $0.62 per share, up from $0.44 in Q1 2025, as we continue to focus on driving profitable growth. Ashish will add further color on our financial performance later in today's call. Turning to the outlook for 2026, for our diversified end markets, demand is expected to be solid.

Speaker #2: We also added a new customer in the transportation market. Our operational execution was evident as we expanded gross margin by 250 basis points in the first quarter.

Speaker #2: We maintained strong cash flow generation supporting our balanced capital allocation approach that includes strategic investments in growth and returning cash to shareholders. 1st quarter adjusted diluted earnings were $62 per share, up from $44 in the 1st quarter of 2025, as we continue to focus on driving profitable growth.

Speaker #2: Ashish will add further color on our financial performance later in today's call. Turning to the outlook for 2026, for our diversified end markets, demand is expected to be solid.

Speaker #2: In the medical market, we see continued momentum in therapeutics, where we have expanded capacity. In aerospace and defense, revenue is expected to grow given our backlog and the normalization of government funding.

Kieran O'Sullivan: In the medical market, we see continued momentum in therapeutics, where we have expanded capacity. In aerospace and defense, revenue is expected to grow given our backlog and the normalization of government funding. Industrial OEM and distribution sales are expected to be solid. We continue to monitor the potential economic impact of the current geopolitical conflicts for the H2 of the year. Longer term, we expect our material formulations, supported by three leading technologies and their derivatives, to continue to drive our growth in key high quality end markets in line with our diversification strategy. Across transportation markets, production volumes are expected to be down given the current geopolitical uncertainties and the potential impact on the economy. Global light vehicle volumes from IHS were recently forecasted to soften. The North American light vehicle market is expected to be in the 15 million unit range.

Speaker #2: Industrial OEM and distribution sales are expected to be solid. We continue to monitor the potential economic impact of the current geopolitical conflicts for the second half of the year.

Speaker #2: Longer term, we expect our material formulations supported by three leading technologies and their derivatives to continue to drive our growth in key high-quality end markets in line with our diversification strategy.

Speaker #2: Across transportation markets, production volumes are expected to be down given the current geopolitical uncertainties and the potential impact on the economy. Global light vehicle volumes from IHS were recently forecasted to soften.

Kieran O'Sullivan: Across transportation markets, production volumes are expected to be down given the current geopolitical uncertainties and the potential impact on the economy. Global light vehicle volumes from IHS were recently forecasted to soften. The North American light vehicle market is expected to be in the 15 million unit range.

Speaker #2: The North American light vehicle market is expected to be in the $15 million unit range, European production is forecasted to be in the $16 to $17 million unit range, China volumes are expected to be in the $32 million unit range.

Kieran O'Sullivan: European production is forecasted to be in the 16 to 17 million unit range. China volumes are expected to be in the 32 million unit range. We continue to monitor potential impact from the geopolitical situation, supply chain issues related to petroleum products, especially resin, and other components such as rare earth, metals, and semiconductors. We anticipate commercial vehicle demand to improve in the H2 of the year. We are closely evaluating the Section 232 tariff changes and focusing on agility and adapting to cost and price adjustments in close collaboration with our customers and suppliers. Our strong balance sheet, healthy cash generation, and experienced teams provide us with the tools necessary to manage these headwinds while continuing to invest in growth opportunities and also advancing innovation. Our increasingly diversified business model continues to enhance our growth and quality of earnings.

Speaker #2: We continue to monitor potential impact from the geopolitical situation, supply chain issues related to petroleum products—especially resin—and other components such as rare earth metals, and vehicle demand to improve in the second half of the year.

Speaker #2: We are closely evaluating the Section 232 tariff changes and focusing on agility in adapting to cost and price adjustments, in close collaboration with our customers and suppliers.

Speaker #2: Our strong balance sheet, healthy cash generation, and experienced teams provide us with the tools necessary to manage these headwinds while continuing to invest in growth opportunities and also advancing innovation.

Speaker #2: Our increasingly diversified business model continues to enhance our growth and quality of earnings. Assuming the continuation of current market conditions, for full year 2026, we are narrowing our sales guidance in the range of $560 to $580 million, and adjusted diluted EPS to be in the range of $2.35 to $2.45.

Kieran O'Sullivan: Our increasingly diversified business model continues to enhance our growth and quality of earnings. Assuming the continuation of current market conditions, for full year 2026, we are narrowing our sales guidance in the range of $560 to 580 million, and adjusted diluted EPS to be in the range of $2.35 to 2.45. Now I'll turn it over to Pratik, who will walk us through the end market performance. Pratik?

Kieran O'Sullivan: Assuming the continuation of current market conditions, for full year 2026, we are narrowing our sales guidance in the range of $560 to 580 million, and adjusted diluted EPS to be in the range of $2.35 to $2.45. Now I'll turn it over to Pratik, who will walk us through the end market performance. Pratik?

Speaker #2: Now I'll turn it over to Prateek, who will walk us through the end market performance. Prateek?

Speaker #3: Thank you, Kieran. Our medical end market delivered strong performance in the 1st quarter with sales of $25 million up 28% versus a prior year period, reflecting a sustained growth momentum across our medical portfolio particularly in therapeutic applications where we see robust demand.

Pratik Trivedi: Thank you, Kieran. Our medical end market delivered strong performance in Q1 with sales of $25 million, up 28% versus the prior year period, reflecting a sustained growth momentum across our medical portfolio, particularly in therapeutic applications where we see robust demand. Bookings in the quarter were up 18% compared to the prior year period. The book-to-bill ratio for Q1 was 1.2, reflecting continued momentum in this market. We continue to see growth prospects in diagnostic imaging, aesthetics, and minimally invasive surgical systems where there is an increased demand for precision, reliability, and patient monitoring. Our precision sensors and transducers enable high-resolution imaging and precise energy delivery in applications such as ultrasound and intravascular diagnostics, supporting early detection, better visualization, and more targeted patient treatments.

Speaker #3: Bookings in the quarter were up 18% compared to the prior year period. The book-to-bill ratio for the 1st quarter was 1.2, reflecting continued momentum in this market.

Speaker #3: We continue to see growth prospects in diagnostic imaging, aesthetics, and minimally invasive surgical systems where there is an increased demand for precision, reliability, and patient monitoring.

Speaker #3: Our precision sensors and transducers enable high-resolution imaging and precise energy delivery in applications such as ultrasound and intravascular diagnostics, supporting early detection and better visualization and more targeted patient treatments.

Speaker #3: In patient and medical equipment monitoring, our temperature and position sensors provide high accuracy and stability supporting reliable vital sign measurement and device performance over extended life cycles.

Pratik Trivedi: In patient and medical equipment monitoring, our temperature and position sensors provide high accuracy and stability, supporting reliable vital sign measurement and device performance over extended life cycles. Our therapeutic products enhance skin lifting and tightening through non-invasive aesthetic treatments that significantly improve patient experience over alternative procedures. During Q1, we had multiple wins across all regions for medical ultrasound and a large win for non-invasive aesthetics application. Demand remains robust for ultrasound imaging and strong for therapeutic products. Knowing that our product support technologies used to save lives is central to our purpose in the medical market. These mission-critical healthcare applications demand uncompromising quality and reliability, reinforcing our commitment to continuous innovation and operational excellence. With an aging population and innovations in healthcare supported by CTS products, the medical market will continue to enhance our growth profile.

Speaker #3: Our therapeutic products enhance skin lifting and tightening through non-invasive aesthetic treatments that significantly improve patient experience over alternative procedures. During the 1st quarter, we had multiple wins across all regions for medical ultrasound and a large win for non-invasive aesthetics application.

Speaker #3: Demand remains robust for ultrasound imaging, and strong for therapeutic products. Knowing that our products support technologies used to save lives is central to our purpose in the medical market.

Pratik Trivedi: Demand remains robust for ultrasound imaging and strong for therapeutic products. Knowing that our product support technologies used to save lives is central to our purpose in the medical market. These mission-critical healthcare applications demand uncompromising quality and reliability, reinforcing our commitment to continuous innovation and operational excellence. With an aging population and innovations in healthcare supported by CTS products, the medical market will continue to enhance our growth profile.

Speaker #3: These mission-critical healthcare applications demand uncompromising quality and reliability, reinforcing our commitment to continuous innovation and operational excellence. With an aging population and innovations in healthcare, supported by CTS products, the medical market will continue to enhance our growth profile.

Speaker #3: Aerospace and defense sales for the 1st quarter were $17 million, up 11% compared to previous year. Book-to-bill ratio was less than 1. We expect the defense bookings to pick up during the rest of the year.

Pratik Trivedi: Aerospace and Defense sales for Q1 were $17 million, up 11% compared to previous year. Book-to-bill ratio was less than one. We expect the defense bookings to pick up during the rest of the year. Our pipeline of new opportunities remains strong, with backlog levels supporting future growth. Undersea warfare and surveillance are critical elements of modern defense strategy, requiring advanced sensing technologies to detect, track, and classify increasingly quiet and sophisticated underwater threats. CTS supports this domain through high-performance piezoelectric sensors, transducers, and subsystems that convert acoustic signals into actionable intelligence. Our RF and EMC filters are mission-critical components in defense electronics, ensuring signal integrity and electromagnetic compatibility in secure communications, radar, missile control, and avionics systems. Our products also support unmanned systems and satellite platforms that rely on highly efficient, lightweight technologies to operate in extreme environments with limited power.

Speaker #3: Our pipeline of new opportunities remains strong, with backlog levels supporting future growth. Undersea warfare and surveillance are critical elements of modern defense strategy, requiring advanced sensing technologies to detect, track, and classify increasingly quiet and sophisticated underwater threats.

Speaker #3: CTS supports this domain through high-performance piezoelectric sensors, transducers, and subsystems that convert acoustic signals into actionable intelligence. Our RF and EMC filters are mission-critical components in defense electronics ensuring signal integrity and electromagnetic compatibility in secure communications radar, missile control, and avionics systems.

Pratik Trivedi: Our RF and EMC filters are mission-critical components in defense electronics, ensuring signal integrity and electromagnetic compatibility in secure communications, radar, missile control, and avionics systems. Our products also support unmanned systems and satellite platforms that rely on highly efficient, lightweight technologies to operate in extreme environments with limited power.

Speaker #3: Our products also support unmanned systems and satellite platforms that rely on highly efficient, lightweight technologies to operate in extreme environments with limited power. During the quarter, we were awarded a significant underwater hull penetrator business win, with a potential contract value of around $20 million over a five-year period.

Pratik Trivedi: During the quarter, we were awarded a significant underwater hull penetrator business win with a potential contract value of around $20 million over a 5-year period. We also registered multiple wins in the quarter for naval sonar and filter applications with several customers. In the quarter, we added 2 new customers for RF filters, specializing in providing secure communications, SATCOM connectivity, and anti-jamming applications. We are deeply engaged across multiple customer platforms and expect the government funding cycles to start to normalize in H2 2026, and the funds to flow through with the enactment of the full-year appropriations bill in February. Industrial end-market performance remained strong, with Q1 sales of $37 million, representing 14% year-over-year growth and supporting the broader recovery trend underway since 2025.

Speaker #3: We also registered multiple wins in the quarter for naval sonar and filter applications with several customers. In the quarter, we added two new customers for RF filters: specializing in providing secure communications SATCOM connectivity and anti-jamming applications.

Speaker #3: We are deeply engaged across multiple customer platforms and expect the government funding cycles to start to normalize in the second half of 2026 and the funds to flow through with the enactment of the full-year appropriations bill in February.

Speaker #3: Industrial end market performance remains strong, with 1st quarter sales of $37 million representing 14% year-over-year growth and supporting the broader recovery trend underway since 2025.

Speaker #3: Bookings in the quarter were up 28% from the same period last year, reflecting stable growth from our OEM customers as well as distribution partners.

Pratik Trivedi: Bookings in the quarter were up 28% from the same period last year, reflecting stable growth from our OEM customers as well as distribution partners. The book-to-bill ratio was 1.29 compared to 1.15 in Q1 2025. We were successful with multiple wins across a diverse range of industrial applications in the quarter, including distribution components, industrial printing, and flow meter applications where our products help in accurately measuring the flow of liquids and gases in industrial systems. We also saw solid momentum in temperature sensing with wins in heat pumps, pool and spa systems, and commercial appliances. These applications underscore our role in enabling more energy efficient and optimized industrial systems. Industrial demand is expected to remain strong in 2026, supported by secular tailwinds, including automation, connectivity, and digitization.

Speaker #3: The book-to-bill ratio was 1.29 compared to 1.15 in the 1st quarter of 2025. We were successful with multiple wins across a diverse range of industrial applications in the quarter including distribution components, industrial printing, and flow meter applications where our products help in accurately measuring the flow of liquids and gases in industrial systems.

Speaker #3: We also saw solid momentum in temperature sensing with wins in heat pumps, pool and spa systems, and commercial appliances. These applications underscore our role in enabling more energy-efficient and optimized industrial systems.

Speaker #3: Industrial demand is expected to remain strong in 2026, supported by secular tailwinds including automation, connectivity, and digitization. At the same time, the push for higher energy efficiency and continued manufacturing automation is expanding the addressable opportunity for our advanced sensing technologies.

Pratik Trivedi: At the same time, the push for higher energy efficiency and continued manufacturing automation is expanding the addressable opportunity for our advanced sensing technologies. Transportation sales in Q1 at $60 million represents a 3% growth over the same period last year and a 7% sequential growth quarter-over-quarter, which appears to demonstrate early signs of stability. Qualification of our next-generation Smart Actuator across our customers' platforms is progressing, and we plan to implement further product enhancements later in 2026. Our new business wins in the quarter were a good mix of sensors and foot control solutions across a diverse set of customers. We added Accelerometer to our sensors product portfolio with an award from a North American OEM supporting safety, dynamics control, ride comfort, and advanced driver assistance systems.

Speaker #3: Transportation sales in the 1st quarter at $60 million represents a 3% growth over the same period last year and a 7% sequential growth quarter over quarter which appears to demonstrate early signs of stability.

Speaker #3: Qualification of our next-generation smart actuator across our customers' platforms is progressing, and we plan to implement further product enhancements later in 2026. Our new business wins in the quarter were a good mix of sensors, foot control solutions across a diverse set of customers.

Speaker #3: We added accelerometer to our sensors product portfolio with an award from a North American OEM supporting safety, dynamics control, ride comfort, and advanced driver assistance systems.

Speaker #3: We gained a new customer with our current sensing solution where our products measure the flow of electrical current in vehicle systems to enable safe, efficient, and reliable operation.

Pratik Trivedi: We gained a new customer with our current sensing solution, where our products measure the flow of electrical current in vehicle systems to enable safe, efficient, and reliable operation. As vehicles become more electrified and software controlled, current sensing has become a core enabling technology across higher voltage platforms. In the quarter, we secured multiple wins across the foot controls portfolio with OEMs in China, Japan, Europe, and North America. Overall, we continue to strengthen our footwell presence while broadening our sensing portfolio with powertrain agnostic capabilities that support multiple vehicle architectures. Total book business was approximately $1.1 billion at the end of the quarter. Over the long term, electronic braking remains a compelling opportunity as ADAS vehicle electrification and autonomous capabilities continue to advance. Our products deliver meaningful cost and weight benefits, which are increasingly important for OEMs managing performance, efficiency, and affordability trade-offs.

Speaker #3: As vehicles become more electrified and software-controlled, current sensing has become a core enabling technology across higher-voltage platforms. In the quarter, we secured multiple wins across the foot control portfolio with OEMs in China, Japan, Europe, and North America.

Speaker #3: Overall, we continue to strengthen our footwell presence while broadening our sensing portfolio with powertrain agnostic capabilities that support multiple vehicle architectures. Total booked business was approximately $1.1 billion at the end of the quarter.

Speaker #3: Over the long term, electronic braking remains a compelling opportunity as ADAS, vehicle electrification, and autonomous capabilities continue to advance. Our products deliver meaningful cost and weight benefits which are increasingly important for OEMs managing performance, efficiency, and affordability trade-offs.

Pratik Trivedi: Over the long term, electronic braking remains a compelling opportunity as ADAS vehicle electrification and autonomous capabilities continue to advance. Our products deliver meaningful cost and weight benefits, which are increasingly important for OEMs managing performance, efficiency, and affordability trade-offs. We remain confident in the long-term growth outlook for our footwell products along with our expanding sensor portfolio. Based on recent IHS forecast, global light vehicle market is expected to be slightly down for 2026. The commercial vehicle market is expected to grow based on rising freight rates, improving spot and contract pricing, and pre-buy related to emission regulation changes in 2027. I'll turn it over to Ashish, who will walk us through the financials in details.

Speaker #3: We remain confident in the long-term growth outlook for our footwell products along with our expanding sensor portfolio. Based on recent IHS forecast, global light vehicle market is expected to be slightly down for 2026.

Pratik Trivedi: We remain confident in the long-term growth outlook for our footwell products along with our expanding sensor portfolio. Based on recent IHS forecast, global light vehicle market is expected to be slightly down for 2026. The commercial vehicle market is expected to grow based on rising freight rates, improving spot and contract pricing, and pre-buy related to emission regulation changes in 2027. I'll turn it over to Ashish, who will walk us through the financials in details.

Speaker #3: The commercial vehicle market is expected to grow based on rising freight rates improving spot and contract pricing and pre-buy related to emission regulation changes in 2027.

Speaker #3: Now, I'll turn it over to Ashish who will walk us through the financials in detail.

Speaker #2: Thank you, Prateek. 1st quarter sales were $139 million. Up 11% compared to the 1st quarter of 2025 and up 1% sequentially from the 4th quarter of 2025.

Ashish Agrawal: Thank you, Pratik. Q1 sales were $139 million, up 11% compared to Q1 2025, and up 1% sequentially from Q4 2025. Sales to diversified end markets increased 18% year-over-year, and the sales to transportation customers were up 3%. Foreign currency changes impacted sales favorably by $3 million in Q1. Our adjusted gross margin was 39.5%, up 250 basis points compared to Q1 2025, and up 40 basis points compared to Q4 2025. The year-over-year improvement in gross margin was driven by operational improvements and the favorable impact of end market mix. Gross margin was also favorably impacted by $700,000 due to foreign currency changes.

Speaker #2: Sales to diversify then markets increased 18% year over year. And the sales to transportation customers were up 3%. Foreign currency changes impacted sales favorably by $3 million in the 1st quarter.

Speaker #2: Our adjusted gross margin was 39.5% up 250 basis points compared to the 1st quarter of 2025 and up 40 basis points compared to the 4th quarter of 2025.

Speaker #2: The year-over-year improvement in gross margin was driven by operational improvements and the favorable impact of end market mix. Gross margin was also favorably impacted by $700,000 due to foreign currency changes.

Speaker #2: We are monitoring the impact of Section 232 tariff changes on steel and aluminum inflation in precious metals and cost increases due to the higher oil prices.

Ashish Agrawal: We are monitoring the impact of Section 232 tariff changes on steel and aluminum, inflation in precious metals, and cost increases due to the higher oil prices. Our teams are already working to mitigate these impacts and are partnering with customers and suppliers towards the goal of keeping the effect on our margins cost neutral. Our tax rate for the quarter was 20.7%, slightly better than expected due to the mix of earnings and certain discrete items. For the full year, we expect our tax rate to be in the range of 21% to 23%. Earnings per diluted share for Q1 were $0.59 compared to $0.44 for the same period last year. Adjusted earnings for Q1 were $0.62 per diluted share compared to $0.44 per diluted share for the same period last year.

Speaker #2: Our teams are already working to mitigate these impacts and are partnering with customers and suppliers towards a goal of keeping the effect on our margins cost neutral.

Speaker #2: Our tax rate for the quarter was 20.7% slightly better than expected due to the mix of earnings and certain discrete items. For the full year, we expect our tax rate to be in the range of 21 to 23%.

Speaker #2: Earnings per diluted share for the first quarter were $0.59, compared to $0.44 for the same period last year. Adjusted earnings for the first quarter were $0.62 per diluted share, compared to $0.44 per diluted share for the same period last year.

Speaker #2: Moving to cash generation and the balance sheet, we generated $17 million in operating cash flow for the 1st quarter of 2026. Our cash balance was $91 million and borrowings were $63 million from our credit facility at the end of Q1 2026.

Ashish Agrawal: Moving to cash generation and the balance sheet. We generated $17 million in operating cash flow for Q1 2026. Our cash balance was $91 million, and borrowings were $63 million from our credit facility at the end of Q1 2026. During the quarter, we purchased 177,000 shares of CTS stock, totaling approximately $9 million. In total, we returned $10 million to shareholders through dividends and share buybacks in Q1 2026. We have another $82 million remaining under our current share repurchase program. We remain focused on strong cash generation and appropriate capital allocation. With a strong balance sheet, we 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.

Speaker #2: During the quarter, we purchased 177,000 shares of CTS stock totaling approximately $9 million. In total, we returned $10 million to shareholders through dividends and share buybacks in the 1st quarter of 2026.

Speaker #2: We have another $82 million remaining under our current share repurchase program. We remain focused on strong cash generation and appropriate capital allocation. With a strong balance sheet, we continue to support organic growth, strategic acquisitions, and returning cash to shareholders.

Speaker #2: This concludes our prepared comments. We would like to open the line for questions at this time.

Speaker #3: We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand.

Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Franzreb with Sidoti & Co. Your line is open. Please go ahead.

Speaker #3: To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #3: If you're a muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Franzreb with Sidotenko.

Speaker #3: Your line is open. Please go ahead.

John Franzreb: Good morning, everyone, congratulations on another great quarter.

Speaker #4: Good morning, everyone, and congratulations on another great quarter.

John Franzreb: Good morning, everyone, congratulations on another great quarter.

Speaker #5: Morning, Ashish.

Ashish Agrawal: Morning, John.

John Franzreb: I'd like to start with actually the quarter itself that we just completed. A couple of really quick questions here. The revenue was better than I expected. I was curious if any jobs revenue got pulled forward into the Q1 from the Q2. Did anything like that happen in the period?

Speaker #4: I'd like to start with actually the quarter itself that we just completed. A couple of really quick questions here. The revenue was better than I expected.

Speaker #4: I was curious if any jobs revenue got pulled forward into the 1st quarter from the 2nd. Anything like that happened in the period?

Speaker #5: No, John. It was a really good quarter. Nothing pulled forward.

Ashish Agrawal: No, John, it was a really good quarter. Nothing pulled forward.

Kieran O'Sullivan: No, John, it was a really good quarter. Nothing pulled forward.

Speaker #4: Got it. Got it. Well, then looking back at maybe some of these numbers, I'm curious if the gross margin profile differential between some of the diversified end markets and I guess we conclude the transportation end market, is it significant that we should really be something cognizant of if medicals sizably better, versus A&D?

John Franzreb: Got it. Got it. Well, looking back at maybe some of these numbers, I'm curious if the gross margin profile differential between some of the diversified end markets, and I guess we can include the transportation end market, is it significant that we should really be something cognizant of if, you know, medical is sizably better, you know, versus A&D? You know, how should we think about, you know, the puts and takes by end market?

Speaker #4: How should we think about the puts and takes by end market?

Speaker #2: Yeah, John, in previous discussions, we have talked about our margin profile in the diversified end markets. We have much better margin profile compared to transportation and as we've talked about, we have pretty good margins on the transportation side as well, but the diversified markets are better.

Ashish Agrawal: Yeah, John, in previous discussions, we have talked about our margin profile. In the diversified end markets, we have much better margin profile compared to transportation. We, you know, as we've talked about, we have pretty good margins on the transportation side as well, but the diversified markets are better. Within the diversified markets, it's more, I would say, less evenly. It's not as widely spread. Medical is definitely the strongest end market in terms of margin profile.

Speaker #2: Within the diversified markets, it's more I would say less evenly. It's not as widely spread. So medical is definitely the strongest end market in terms of margin profile, but we do good in pretty much all the diversified end markets.

John Franzreb: Mm-hmm

Ashish Agrawal: We do good in pretty much all the diversified end markets.

Speaker #4: Okay. So industrial is relatively close to medical, is what you're saying, Ashish?

John Franzreb: Okay. industrial is relatively close to medical, is what you're saying, Ashish?

Ashish Agrawal: There's not a big variation in the margin profile among the diversified end markets. Medical is definitely the strongest one, yes.

Speaker #2: There's not a big variation in the margin profile among the diversified end markets. Medical is definitely the strongest one, yes.

Ashish Agrawal: There's not a big variation in the margin profile among the diversified end markets. Medical is definitely the strongest one, yes.

Speaker #4: Okay. And the reason I'm kind of getting to all these questions here is I looked at the incremental operating contribution in the quarter and it came to roughly 44% if I did the back of the envelope math right.

John Franzreb: Okay. The reason I'm kind of getting to all these questions here is I looked at the incremental operating contribution in the quarter, and it came to, you know, roughly 44%, if I did the back of the envelope math right, and I thought that was rather astonishing. Looking at the revenue profile, to me, it kind of lent itself that medical was the primary driver. I just wanted to make sure if I was thinking about this properly, and I'm thinking about the incremental margin profile properly. I'm wondering any thoughts about my conclusions here?

Speaker #4: And I thought that was rather astonishing. And I'm looking at the revenue profile to me kind of lent itself that medical was the primary driver.

Speaker #4: And I just wanted to make sure if I was thinking about this properly and I'm thinking about the incremental margin profile properly, I'm wondering any thoughts about my conclusions here.

Speaker #5: No, John. I think the way to look at it, Ashish gave you the color on medical. The way to look at it is with our strategy, we've always said as we grow diversified markets, the quality of the earnings will improve and that's what you're seeing here.

Pratik Trivedi: No, John, I think the way to look at it, Ashish gave you the color on medical. The way to look at it is, with our strategy, we've always said as we grow diversified markets, the quality of the earnings will improve, and that's what you're seeing here.

Kieran O'Sullivan: No, John, I think the way to look at it, Ashish gave you the color on medical. The way to look at it is, with our strategy, we've always said as we grow diversified markets, the quality of the earnings will improve, and that's what you're seeing here.

Speaker #4: Right. Right. Okay. Another quick question. It looks like debt ticked up in the quarter. Why was that the case?

John Franzreb: Right. Right. Okay. Another quick question. It looked like debt ticked up in the quarter. Why was that the case?

Speaker #5: So John, in the 1st quarter, we typically have lower operating cash flow as we do incentive comp payments and those types of things. We also continued our buybacks in the 1st quarter.

Ashish Agrawal: John, in Q1, we typically have lower operating cash flow, as we do, incentive comp payments and those types of things.

John Franzreb: Mm-hmm

Ashish Agrawal: ... we also continued our buybacks in Q1. The combination of those two things and a slightly higher CapEx than we expect were normally expecting, those were the key drivers. The debt was up by about $5 million. Compared to where we are overall, we are continuing to make good progress. We have almost fully paid down the borrowings from the SyQwest acquisition at this point.

Speaker #5: So the combination of those two things and a slightly higher CapEx than we expect were normally expecting those were the key drivers. The debt was up by about $5 million.

Speaker #5: But compared to where we are overall, we are continuing to make good progress. We have almost fully paid down the borrowings from the Cypress acquisition at this point.

Speaker #4: Right. Right. Okay. I think I've monopolized the call enough. I'm going to get back into queue. Thank you, guys.

John Franzreb: Right. Right. Okay. I think I've monopolized the call enough. I'm gonna back it to Keith. Thank you, guys.

Speaker #5: Thanks, John.

Pratik Trivedi: Thanks, John.

Kieran O'Sullivan: Thanks, John.

Ashish Agrawal: Thanks, John.

Speaker #3: Your next question comes from the line of Hendi Sosento with Gabelli Funds. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Hendi Susanto with Gabelli Funds. Your line is open. Please go ahead.

Speaker #6: Good morning, Kieran, Ashish, and Pratik.

Hendi Susanto: Good morning, Kieran, Ashish, and Pratik.

Speaker #2: Morning, Hendi.

Pratik Trivedi: Morning, Hendi.

Speaker #6: Yeah, congrats on the good results. My first question is, you mentioned capacity expansion in medical. I would like to get more color in terms of how much more, and if there are any statistics, like up to how much sales you can take—that would be, I think, helpful.

Ashish Agrawal: Morning, Hendi.

Hendi Susanto: Yeah. Congrats on good results. My first question is, you mentioned capacity expansion in medical, and I would like to get more color in terms of how much more and if there's any statistics like up to how much sales you can take. I think that would be helpful.

Speaker #4: Sure. Thank you, Hendi, for the question. So the capacity with medical end market primarily refers to our aesthetics application and we've got strong partnership with some of the customers here where they give us a long-term forecast and we are able to install capacity ahead of the demand here.

Pratik Trivedi: Sure. Thank you, Hendi, for the question. The capacity in our medical end market primarily refers to our aesthetics application. And we've got strong partnership with some of the customers here, where they give us a long-term forecast, and we are able to, you know, install capacity ahead of the demand here. We continue to see strong momentum in this end market, and we are expecting a double-digit growth year over year.

Speaker #4: We continue to see strong momentum in this end market and we are expecting a double-digit growth year over year.

Speaker #6: Double-digit growth in capacity or in sales?

Hendi Susanto: Double-digit growth in capacity or in sales?

Speaker #4: In the sales. Which means that we would need to have that capacity installed ahead of it.

Pratik Trivedi: In the sales. Which means that we would need to have that capacity installed ahead of it.

Speaker #6: Yeah.

Ashish Agrawal: Yeah. Hendi, we are not seeing any concerns in our capability to meet the demand profile that we're seeing in that space.

Hendi Susanto: Yeah.

Speaker #2: Hendi, we are not seeing any concerns in our capability to meet the demand profile that we are seeing in that space.

Pratik Trivedi: Hendi, we are not seeing any concerns in our capability to meet the demand profile that we're seeing in that space.

Speaker #6: I see. And then, Ashish, I have a question on the gross margin. So there's some mixed benefit, and the non-transportation or the diversified end market is a favorable tailwind.

Hendi Susanto: I see. Ashish, I have a question on the gross margin. There's some mixed benefit and the non-transportation or the diversified end market is a favorable tailwind. On the other hand, there's also the challenge of high oil prices, component costs. How sustainable is the strong gross margin that we are seeing in Q1? Should we expect some headwinds because of those challenges? Do you anticipate that a Q1 gross margin can serve as a baseline that is sustainable?

Speaker #6: On the other hand, there's also the challenge of high oil prices component costs. How sustainable is the strong gross margin that we are seeing in Q1?

Speaker #6: Should we expect some headwinds because of those challenges or do you anticipate that Q1 gross margin can serve as a baseline that is sustainable?

Speaker #4: Hendi, that's a good question. That's something that we look at very, very carefully. In addition to the topics that you mentioned, we also had a slight impact from favorable currency changes.

Ashish Agrawal: Hendi, that's a good question. You know, that's something that we look at very, very carefully. In addition to the topics that you mentioned, we also had a slight impact from favorable currency changes, which was about $700,000. You know, the currency can go in multiple different directions, so we'll just continue watching the markets for that. We are experiencing cost pressures related to precious metals. That has been going on since late last year, and we have been working closely with our customers to manage through the impact of that with pricing changes, with material substitutions, those types of things.

Speaker #4: Which was about $700,000. So the currency can go in multiple different directions. So we'll just continue watching the markets for that. We are experiencing cost pressures related to precious metals.

Speaker #4: That has been going on since late last year and we have been working closely with our customers to manage through the impact of that with pricing changes, with material substitutions, those types of things.

Ashish Agrawal: More recently, we are also seeing inflation related to oil-derived products like resin, epoxy, transportation costs, those types of things. We are expecting to see more cost pressures to, you know, late Q1 going into Q2. Our teams are already working with customers to manage through that and as well as suppliers to manage through that. We will see some headwinds, but at the same time, we are very, very focused on making sure that we can make the impact cost neutral on our margins. There can be some timing differences which could impact margins in the short term, but we expect to be able to work through it as we have in the past several years.

Speaker #4: More recently, we are also seeing inflation-related to oil-derived products like resin, epoxy, transportation costs, those types of things. That we are expecting to see more margin or sorry, cost pressures to late Q1 going into Q2 and our teams are already working with customers to manage through that.

Speaker #4: And as well as suppliers to manage through that. So we will see some headwinds, but at the same time, we are very, very focused on making sure that we can make the impact cost-neutral on our margins.

Speaker #4: Now, there can be some timing differences which could impact margins in the short term, but we expect to be able to work through it as we have in the past several years.

Speaker #6: Okay. Yeah. And then may I ask more insight into the aerospace and defense expectations of funding of various programs will improve in the second half?

Hendi Susanto: Okay, yeah. May I ask more insight into the aerospace and defense expectations of funding of various programs will improve in H2, booking will pick up. Considering that the government fiscal calendar of, let's say, like end of September, how should we expect, let's say like new bookings, new funding to materialize in sales? I assume there would be some lag. I don't know whether Q4 starting point is somewhat a reasonable expectation.

Speaker #6: Booking will pick up? And then considering that the government fiscal calendar of, let's say, end of September, how should we expect let's say new bookings, new funding to materialize in sales?

Speaker #6: I assume there would be some lack. I don't know whether Q4 starting point is somewhat a reasonable expectation.

Speaker #4: Yeah. Hendi, I mean, if you look at for the aerospace and defense end market and just looking at the broader macro trend, right, overall, the defense spendings will continue to remain elevated due to the current geopolitical unrest as well as investments in the infrastructure primarily around the naval side.

Pratik Trivedi: Yeah, Hendi Susanto. I mean, if you look at for the aerospace and defense end market, just looking at the broader macro trend, right? Overall, the defense spendings will continue to remain elevated due to the current geopolitical unrest as well as investments in the infrastructure, primarily around the naval side of defense. What we are seeing right now is we are actively engaged in multiple platform discussions with a wide range of customers. However, what we've experienced in the Q1 is a delay in the government funding. Towards the end of the quarter, with the passage of the appropriations bill, we expect that funding pace to pick up in the H2 of this year. The other point to note here is that we usually also have a bit of a lumpiness in terms of how we get the orders on the defense side.

Speaker #4: Of defense. What we are seeing right now is, we are actively engaged in multiple platform discussions with a wide range of customers. However, what we've experienced in the first quarter is a delay in the government funding, but towards the end of the quarter, with the passage of the appropriations bill, we expect that funding pace to pick up in the second half of this year.

Speaker #4: The other point to note here is that we usually also have a bit of a lumpiness in terms of how we get the orders on the defense side.

Speaker #4: So you could potentially have a quarter where our book-to-bill might be less than one. However, then it makes it up in the remainder of the year.

Pratik Trivedi: You could potentially have a quarter where our book-to-bill might be less than 1. However, then it makes it up in the remainder of the year.

Speaker #6: Yeah. Yeah. And then last question for me. Any update on the Smart Actuator and then potential change in allocation by the customer?

Hendi Susanto: Yep. Yeah. Last question for me, any update on the Smart Actuator and then potential change in allocation by the customer?

Pratik Trivedi: Hendi, we continue to be on track with launching the revised version of the actuator with our customer. We expect, you know, normalized modest growth in that particular product line for this year.

Speaker #4: Hendi, we continue to be on track with launching the revised version of the actuator with our customer. And we expect normalized modest growth in that particular product line.

Speaker #4: For this year.

Speaker #6: Okay. Got it. Yeah. Thank you.

Hendi Susanto: Okay. Got it. Yeah. Thank you.

Speaker #4: Great. Thanks, Hendi. Thanks, Hendi.

Kieran O'Sullivan: Great. Thanks, Hendi.

Pratik Trivedi: Thanks, Andy.

Speaker #1: Your next question comes from the line of John Franzerup with Sidoni & Co. Your line is open. Please go ahead.

Operator: Your next question comes from the line of John Franzreb with Sidoti & Co. Your line is open. Please go ahead.

Speaker #4: Yeah. I'm actually curious about the growth that you saw in the transportation market in the first quarter. I guess firstly, were you surprised by that?

John Franzreb: Yeah. I'm actually curious about the growth that you saw in the transportation market in Q1. I guess firstly, were you surprised by that?

Speaker #3: And John, I would say what we were pleased with how we performed in the light vehicle demand and saw a little bit more positiveness in the commercial vehicle and we think as Pratik said, that's going to extend into the second half of the year.

Kieran O'Sullivan: John, I would say, we were pleased with how we performed in the light vehicle demand and saw a little bit more positiveness in the commercial vehicle. We think, as Pratik said, that's gonna extend into H2 of the year.

John Franzreb: As I'm sure you've seen, the commercial truck market has seen a strong bookings profile over the last few months. A lot of people are suggesting that the benefits from that, those order profiles are a second half event. I'm curious if you if that's how you see it playing out, or does it affect you in any different way?

Speaker #4: As I'm sure you've seen, the commercial truck market has seen a strong bookings profile over the last few months. A lot of people are suggesting that the benefits from those order profiles are a second half event.

Speaker #4: I'm curious if you if that's how you see it playing out or is it or does it affect you in any different way?

Speaker #3: No, we do see it playing out the same way, John. I mean, as you cautious optimism here primarily related to the rising freight rates just improved pricing and then we've got in the second half of the year, the pre-buy event due to EPA 2027.

Pratik Trivedi: No, we do see it playing out the same way, John. I mean, as you can, you know, in the market right now, we are seeing cautious optimism here, primarily related to the rising freight rates, you know, just improved pricing. We've got in H2, the pre-buy event due to EPA 2027. We expect it to play out in a very similar manner.

Speaker #3: So we expect it to play out in a very similar manner.

Speaker #4: Okay. So second half. Gotcha. So then the expectation for the transportation to be down for the full year. I'm gathering that suggests you expect the global vehicle market to be continually to weaken for the balance of the year.

John Franzreb: Okay. H2. Gotcha. The expectation for the transportation to be down for the full year, I'm gathering that suggests you expect the global vehicle market to be continually to weaken for the balance of the year. Is that also a fair assessment?

Speaker #4: Is that also a fair assessment?

Speaker #3: John, what we would say on the light vehicle market is performing well so far, but in our prepared remarks, we said IHS had forecasted some softness in the second half of the year.

Kieran O'Sullivan: John, what we would say on the light vehicle market, it's performing well so far. In our prepared remarks, we said IHS had forecasted some softness in H2 of the year. With the geopolitical situation, that's how we're thinking about it at this moment, that some softness in the light vehicle, but strength on the commercial vehicle side, balancing it out a little bit.

Speaker #3: And with the geopolitical situation, that's how we're thinking about it at the moment that some softness in the light vehicle, but strength on the commercial vehicle side.

Speaker #3: So balancing it out a little bit.

Speaker #4: Got it. Got it. Okay. And one last question about capital allocation. You really you're buying back stock. As Ashish pointed out, you are paying down debt, albeit there was working capital needs in the first quarter.

John Franzreb: Got it. Okay. One last question about capital allocation. You're buying back stock, as Ashish pointed out, you are paying down debt, albeit there was working capital needs in Q1. What is the outlook right now on the M&A side of the business? Are you in a period of consolidation and working on organic growth, or are you still looking at acquisitions? Can you kind of discuss maybe the size of the markets that you're looking at?

Speaker #4: What is the outlook right now on the M&A side of the business? Are you in a period of consolidation and working on organic growth?

Speaker #4: Or are you still looking at acquisitions? Can you kind of discuss maybe the size of the markets that you're looking at?

Speaker #3: Yeah, John. Just the key points for us from a capital allocation, first of all, is the supporting the organic growth investments, which we have some nice opportunities which Pratik touched on as well in medical.

Kieran O'Sullivan: Yeah, John, the key points for us from the capital allocation, first of all is the supporting the organic growth investments, which we have some nice opportunities which Pratik touched on as well in medical. We're still pursuing strategic acquisitions to advance our diversification and quality of earnings. While we've nothing to re-report today, we're very active in that area and then returning cash to shareholders is how we're approaching it.

Speaker #3: We're still pursuing strategic acquisitions to advance our diversification and quality of earnings. And while we've nothing to report today, we're very active in that area.

Speaker #3: And then returning cash to shareholders is how we're approaching it.

Speaker #4: Okay, Kieran. That's all I got. Thanks for taking the questions.

John Franzreb: Okay, Kieran, that's all I got. Thanks for taking the questions.

Speaker #3: Good. Thank you, John.

Kieran O'Sullivan: Good. Thank you, John.

Speaker #1: There are no further questions at this time. I will now turn the call back to Kieran O'Sullivan for closing remarks.

Operator: There are no further questions at this time. I will now turn the call back to Kieran O'Sullivan for closing remarks.

Speaker #3: Thank you. Thank you all for your time today. Diversification remains a strategic priority to drive growth and margin expansion. In addition, we are expanding in-vehicle powertrain agnostic solutions.

Kieran O'Sullivan: Thank you. Thank you all for your time today. Diversification remains a strategic priority to drive growth and margin expansion. In addition, we are expanding in-vehicle powertrain agnostic solutions. We are guided by our Evolution 2030 strategic initiative to enhance our emphasis on growth, operational rigor, employee engagement, while also giving back to the communities where we operate. We look forward to updating you on our Q2 2026 results in July. This concludes our call.

Speaker #3: We are guided by our Evolution 2030 strategic initiative to enhance our emphasis on growth, operational rigor, and employee engagement, while also giving back to the communities where we operate.

Speaker #3: We look forward to updating you on our second quarter 2026 results in July. This concludes our call.

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

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