Oct 27, 2026 earnings call — Millar acquisition and margin expansion
Raised full-year sales guidance to $580 million-$590 million and adjusted diluted EPS to $2.78-$2.88.
Revenue $0.1B (est $0.1B) · EPS $0.77 (est $0.65) · Next-quarter revenue outlook $0.6B–$0.6B
Key quotes
"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 decrease of 4% sequentially, mainly due to timing of orders."
"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."
Analyst Q&A 4
Millar profit margin and sales growth
Q (Gary Prestopino · Barrington): Is Millar's adjusted EBITDA margin accretive? Also, what has been Millar's historical sales growth and how can CTS grow it?
A: They said gross margin is accretive. They said EBITDA will be positive but maybe not accretive at the start, and they expect it to improve with synergies and sales growth. They declined to give historical sales numbers but called Millar strong in advanced medical treatment with a respected technology and a customer base CTS can grow.
"The EBITDA will be positive, obviously, but maybe not quite accretive at the beginning." — Ashish Agrawal (CFO)
Customer concentration and transport growth
Q (Jaeson Schmidt · Lake Street): Does Millar have significant customer concentration? Was the Q3 transportation growth driven by one or two customers or broad demand?
A: They said Millar is mostly in the medical market and does have some customer concentration, but at the CTS level it will not look materially different and won't make the top customer list. For Q3 transportation, growth was moderate and came from some commercial vehicle gains while light vehicle volumes were flat to slightly down.
"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." — Ashish Agrawal (CFO)
Cash payment, backlog delivery, integration plan
Q (John Franzreb · Sidoti): Was the Millar deal paid all-cash or financed? And what does the A&D delivery schedule and backlog look like going forward? Also, will Millar be consolidated or run standalone and will R&D spend change?
A: They said the acquisition was paid in cash. For A&D, they recognize revenue over time based on percentage of completion and said they have a healthy backlog that positions them well, while noting the business is lumpy by order timing. They do not expect drastic changes to Millar's structure and will integrate some items quickly while taking more time on cultural and systems alignment.
"We generally have an over-time revenue recognition approach where we recognize revenue based on percentage of completion." — Ashish Agrawal (CFO)
Gross margin outlook and actuator timing
Q (Hendi Susanto · Gabelli Funds): What are the puts and takes for future gross margin after the strong 42.2% this quarter? Any update on turbo smart actuator customer allocation and timing for approvals and deliveries?
A: They said the quarter benefited from an unusually favorable mix and they expect good gross margins in coming quarters but maybe not at the 42% level every quarter; they aim to expand gross margins over the mid to long term and warned quarter-to-quarter changes are possible. On the actuator, they are working to qualify products on more engine platforms and expect critical approvals around the middle of 2027, with deliveries about a quarter or two after approval.
"We are working on the products to qualify on additional engine platforms, Hendi, and we are looking at somewhere around the middle of 2027 for some critical approvals." — Pratik Trivedi