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TTM (TTMI)

Participants
Sameer Desai Senior Director of Corporate Development & IR
Thomas Edman President, CEO & Director
Todd Schull Executive VP, CFO & Treasurer
William Stein SunTrust
Steven Fox Cross Research
Sean Hannan Needham & Company
Paul Chung JPMorgan
Matt Sheerin Stifel
Call transcript
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Operator

Good day, and welcome to the TTM Technologies Q3 2018 Earnings Call. At this time, I'd like to turn the conference over to Sameer Desai, Senior Director of Corporate Development and Investor Relations. Please go ahead, sir.

Sameer Desai

Thank you.

Before we get started, I would like to remind everyone that today's call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to TTM's future business outlook. report materially risks forward-looking factors the and our recent differ X due explained Securities could and most more XX-K or uncertainties, annual and results Exchange from filings statements these to in our Commission. Actual other Form with on including the assumptions forward-looking These and are date the on based of statements of expectations management's as this presentation. whether other information, any obligation by revise except these statements, or future required to any new of or update undertake as publicly not law. result does circumstances TTM as events a of Please that registration refer on may in the filings. S-X to Form the disclosures company's on reports statement may be regarding risks the the the which affect SEC and TTM X-K, Form XX-K, XX-Q, other found

non-GAAP measures Such company's substitute in adjusted GAAP at in the is now reconciliation such We Tom. Officer. will direct financial I and measures on And also measures Edman, Please TTM's Chief we call measures as to a not to TTM's which you discuss SEC the EBITDA. be for considered the with GAAP. go Tom presented like press and prepared the would certain as over accordance included on non-GAAP was www.ttm.com. turn should website call with Executive of the available to filed to ahead, this release,

Thomas Edman

our highlights guidance. our performance business XXXX of an including XXXX results. Todd third you, quarter I'll Thank strategy, follow joining discussion CFO, QX for the begin QX and of XXXX Sameer. our of will with Good by afternoon conference a call. quarter our third a you for our quarter, and Schull, financial overview us our thank with followed review from

to We your call questions. the will then open

The contributed quarter meaningful highest contributions revenue high be our of EPS we thank and million progress in and I acquisition Anaren that I contribution our full history the revenues the was quarter of integration. a included we EPS. would in non-GAAP third the the continue and achieved like our results, end consolidated to their non-GAAP above company, to First in of third our $XX.X the provided for EPS third quarter, with all, the a as pleased the first guidance. This results for Anaren's quarter employees to to with on

We continue of on one reduce our markets end markets diversification diversification to of our our our differentiation capabilities. what markets. end path quarter quarterly total of grow towards volatility was in of and our challenging revenues a and in helped company The end

and in markets defense, and more helped end challenging end market. offset Specifically, growth computing cellular, our medical/industrial/instrumentation aerospace to conditions in the automotive

increasing defense well towards to the are driving adoption vehicle see infotainment; Second, a core content we due megatrends PCB the per key markets. term and up automotive continue driving; global growth on to of XXXX. XXXX, near technologies. as PCB in view demand expected $XX our aerospace automotive from safety increased weakness and growth: content end and vehicle autonomous and adoption the connectivity. of market to automotive content XXXX, end by vehicles; advanced of in $XX grow notwithstanding path $XX as in X differentiation driver, as advanced Estimates hybrid in We electric electronics and increasing We

am in engagement revenues. Anaren radar, we also XXXX. robust, added contribute product total, by In a market, further XX XX in that XX well Some which PCB over design quarter. Further, design were which the In wins customer related, vehicles winning as applications remains year won wins are of design aerospace and our have automotive been vehicle. new more begins than with electric activity well employ XXX employees' and to the before bodes new future XXX will with designs, area, Designs we well proud enhanced hybrid currently ADAS defense cameras. Of $XXX our have this such of acquisition. in revenues we efforts third in years. and future new I the the Year-to-date, per designs, these further registered for LIDAR ramp.

Our were the organic all-time on defense X and efforts robust across requirements QX, broad demand aerospace grown have is has base the environment. design-to-specification a core a of supported revenues result programs. of major build-to-print of strength These months at been and This our an XX% customer focus defense team's record by in business in as first supporting a year. our

record On the a the and for aerospace side, year has reported guidance raised earnings, backlog. strong Boeing

contractors Harris wireless existing for market another strong reported represents into and critical proceeding XG The On market. the differentiation the enhanced leveraged of the The on in process addressable to defense Anaren's our defense X tier The side, in track. greatly Lockheed, QX Raytheon, high-growth aerospace technologies focus quarter TTM also and to future components. or guidance which radar and lead Anaren Anaren year. increased raised for acquisition step integrated these Anaren the integrating of earnings our strategy. adoption end such the technology, as of has addition presence in the our defense and will on businesses. and first LX our the substantial that of for was these increase was -- a are also portions into components is market our satellite Anaren

We revenue begun areas. and commercial accelerate the aerospace growth engaging both and in with synergy future the of TTM's on opportunities, have defense the will already process which customers

the with in of TTM moves cycle. to design As Anaren I've mentioned up chain, earlier in value before, higher the engage the us addition customers allowing

customers RF a needs. designed solution TTM Our completely deliver their on meet to now to can rely

to markets. like review end our I'd Now

sales, and market in compared defense XX% of end For of XXXX quarter sales to aerospace TTM, third total represented XXXX. QX the of and sales XX% QX XX%

in XX% million QX. the $XXX end the program to third of in $XXX from million at organically In backlog acquisition, Anaren Total grew contribution the was quarter. addition we year-over-year versus the QX

represent market The accounted in revenue ramp The compared QX of to to end production QX of phone primarily release quarter, smartphone new of increase this sales due of the XX% prior was the total sequential in third of for QX about to expect sales. of in XXXX. We XXXX X% end models. in to cellular and market our XX% from XX%

on the fourth XXXX. quarter of this Networking/communications XXXX We of third weighted XX% to XX% versus to the QX year-over-year basis of in and due softness with E-M quarter third In large decline the the flat in of XX% expect relatively be compared the Greater additional inclusion core market this to ramp second expected while during sales earlier year-over-year, of to third the segment XXXX. of with year's our seasonal same in towards segment. up year-ago XX% the more Dollar QX sales, China cellular and than to to Anaren, in XXXX, as sales accounted weaker in XX% Automotive down sales revenue. total for to QX, for due revenues our global year-on-year this This quarter XX% and customers. began and expect during of TTM Solutions were XXXX. demand in volumes due quarter percentage quarter of we the of second and represent during Automotive business compares represented quarter the sales forecast weakness last than year, unit of were year-over-year. quarter Korea revenue XX% the percentage and a were QX,

total contribute automotive XX% sales expect to QX. We in of

XXXX. total quarter, to Given third centers. market QX believe QX the the will the quarter year-over-year represented computing/storage/peripherals long-term of of in sales by Sales our of forecast in compared XX% in to results below grow XX% XXXX saw X% primarily XX%, XXXX. high-end we driven forecast, We and revenue the XX% by second in QX data end be automotive growth and the X% in

of revenues to in top the customers. second in some our the on and and quarter end this our fourth end XX% came approximately a in the market sales. percentage medical/industrial/instrumentation expect represent contributed accelerate We to same quarter compared total quarter from The in in sales and of year-ago The medical quarter market XXXX. quarter, third XX% basis of the strength year-over-year XX% of instrumentation the

expect sales this represent market to of the sales to end in accelerate year-over-year growth XX% fourth approximately We for and quarter.

the MI&I X% above forecast, in to X% growth results believe XXXX. forecast Given be we the and of QX QX will long-term

cover third quarter. the from details I'll some Next,

which During increase market, Anaren. substrate our HDI, revenue. business, our of the approximately XX% year-over-year compares and approximately advanced the by driven while by for XX% cellular accounted the sequential of XX% end and technology the rigid-flex, company's year-ago to includes increase QX. components, quarter RF quarter, was driven The inclusion the subsystems This was and in in

XX% to will was XX% the utilization in pursue are and We engagement in new XX% our customer activities increase opportunities Capacity leverage business that design Asia-Pacific continuing quarter year-ago in QX advanced QX. technology in compared capabilities to markets. and new in

was in XX% America to overall and additional in Our the North capacity as computing America. our in in QX, XX% North A&D growth production QX, in drove compared end year-ago markets in and utilization quarter XX%

five XX% second year-ago the Our to XX% quarter in XXXX, the and contributed sales in XXXX. top quarter XX% of compared of the third customers in total quarter of

and the of last quarter for quarter in million the customer largest the subject the to cancellations, which $XXX.X backlog, sales and $XXX.X accounted compared Our end at third QX, end XX% million At million QX. third QX. X% $XXX.X is of of the versus XX-day of our to at XX% in end the quarter year year-ago was in

book-to-bill seasonal on market our and benefits positive and ratio from we X.XX the the ending in better-than-expected was October during managed In aerospace demonstrated results ramp X. our PCB our the execution. diversified Our of mix, the achieved months to consumer-oriented X third the markets in results for operational focus continued market, quarter, see defense summary, end

is longer-term on we we strategy cellular operational market and profits, about continue quarter to of discipline. we are challenges our in of fourth positioning diversification, impacting end some build remain our optimistic differentiation the the short-term that and revenue TTM facing While as

our for review Todd? third performance the Todd quarter. Now will financial

Todd Schull

Thanks, Tom, everyone. and good afternoon,

the highlights for XX.X% the EPS $XXX.X earnings revenue ago; the operating non-GAAP non-GAAP a for of of of of and include quarter: third non-GAAP margin record quarter million; year and X.X% $X.XX. in Some quarter a versus revenues

debt million our since had million a We from cash $XXX.X we to now of also million have end. $XX acquisition operations EBITDA quarter and repaid of -- versus of We On million Anaren. another the a after just the of details. $XX repaid flow debt ago; of of $XX.X total adjusted $XX year million;

million $XXX.X in and year million. was were of net On The For second compared comments last sales of and and revenue XXXX of the third share. for diluted to share of due million income net the remainder basis, The $XX.X $XX.X partially quarter in a quarter of GAAP my third to market. quarter, $X.XX XXXX operating quarter share focus medical/industrial/instrumentation end the our release growth the This a income the $XX year, per was the of of aerospace allowance XXXX net or quarter cellular, offset included $XX.X and XXXX of second in million diluted $XX.X or third sales automotive the this XXXX our million XXXX. compared by compared was or $X.XX to core million a lower diluted year-over-year performance. million will the net to $XX.X quarter million. $XX tax end to non-GAAP markets, of quarter third and in quarter defense, financial in $X.XX and $XXX.X compares the GAAP valuation for per which inclusion quarter on in million sales in of per second of Anaren increase computing revenue in third third of million $XXX.X our

Our infrequent noncash associated tax their items well expense performance items as and impact. or unusual costs, as certain excludes non-GAAP acquisition-related other

performance. into this the Selling financial insight a margin the margin noted second which such investors markets non-GAAP the Additionally, we was eyes Gross year. XX.X% in gross the and of of and nonoperational the our challenges to contribution in quarter of lower marketing due tax to million of XX% We and allowance. last present to year or quarter to in third and a see was X.X% $XX provide in third our company XX.X% better last increase net end the The of or the quarter of information million $XX.X second sales through third sales X.X% or and tax in expense, company's was net volumes higher volumes compared of primarily quarter management exclude in than offset year-over-year of enable as ago sales facilities. quarter. the release to $XX.X quarter valuation expense in X.X% changes the Anaren automotive-focused in the million the more versus financial year the ongoing in of earlier,

Third year-over-year quarter net marketing quarter G&A the were million $XX.X net to in of the X.X% G&A or addition and compared a year The X.X% quarter. selling or expense of in million of to was sales increases $XX.X of net ago same due sales million in expenses X.X% Anaren. or previous and sales the and $XX.X

This Anaren Our last quarter million operating was quarter higher interest acquisition XXXX. margin the second term quarter increase compares in associated and to due year an the the was year last in of from quarter, to third incremental X.X% $XX.X X.X% quarter and XX.X%. same the the same third loan expense in the with $X.X Interest million of the rates. in

the $X approximately the per Government we $X.XX exchange to during the exchange share. quarter, the was year. foreign million $X.X the quarter. The a loss million the third in depreciation in to dollar of During or QX gain the incentives quarter, renminbi brought in gain. year, gain versus compares recorded in $X.X primarily million This this of total due to net U.S. last foreign

rate in from tax third quarter, effective was up XX.X% XX.X% the year Our ago. a

of of EBITDA operations Third million the $XX sales. quarter XX.X% diluted versus share. net quarter million million to same compared or XXXX quarter was $XX.X million for the $X.XX second net income was or net in from of share or compares XX.X% sales. or flow $XX.X quarter EBITDA income adjusted Cash the diluted quarter in third In million. $X.XX last Adjusted quarter, third the million sales, net quarter and million. the quarter for third $XXX capital of and adjusted the end year. Net income equivalents diluted million. per the for per million $XX.X XXXX the Cash cash $XX.X $X.XX quarter was share. spending of $XX to XX.X% the $XXX.X or was second This or million net third million quarter EBITDA XXXX per at quarter totaled Depreciation was $XX.X $XXX.X third of net was $XX.X

for like I'd to turn guidance to quarter. our Now the fourth

million. total revenue $XXX to of expect of quarter range for XXXX the $XXX in to fourth We the be million

quarter million. reference As point, $XXX.X a revenue our fourth year last was

We expect per year. shares. to XXX of to share. compares last reported share be in earnings based of QX per is share range to $X.XX EPS earnings The on diluted diluted This the $X.XX million $X.XX count in a non-GAAP diluted forecast approximately of of

varies shares convertible as our count RSUs, guidance but future dilutive options based stock includes such our on share Our price. and with securities no associated bonds, which

increase for dollar share in reminder, shares. average approximately $XX.XX increase quarter, every X.X our price above a a As the during shares by outstanding million would

expense SG&A revenue We that expect the quarter. about be X.X% fourth in of will

expense $XX.X interest expect million. We to total about

estimate assist in rate and to your additional between financial we be XX%. following information. models, offer XX% we effective you our tax developing To Finally, the

intangibles we expense about the We includes expense $X.X and estimate depreciation to $XX record of approximately compensation fourth $XX million; expect will noncash intangibles acquisition. amortization million. amortization stock-based the of million; quarter expense of during of about The interest approximately million; be $X.X of Anaren

reminder, accounting not process a purchase as yet complete. is the However,

amortization change. amount so could And the

the our to like in and December to I'd San Telecommunications Media that be questions. we'll remarks. And like Global X. on Barclays prepared announce now for Travis? That Francisco lines open Finally, in the Technology, Conference I'd concludes participating

Operator

Instructions] First from Stein [Operator comes question [SunTrust] William

William Stein

Great. taking for things talk about. I'd like questions. two Thanks Really to my

to regard think more a is is cellular. that not and the Does quarter First E-MS weakness shortage supply you're demand in in in automotive; outlook soft demand that, With component relate and a that Or next in the cited you to I automotive, business. is and that seeing? perhaps the the decline related?

Thomas Edman

Yes.

to of some Europe. the a we sales reflects unit our E-MS I in in PCB so is customers out part in a where softness come China side, and The contribution on seeing And to really our a larger more -- in primarily terms shortages, coming was were E-MS QX, here in caused which of business, U.S. larger the just really China really customers as definitely business, experiencing, side, were both and some there. more from but the customer call on what vehicle that of side side electric service EV side -- drop of would their that the you they the in automotive just unexpected a bit we from the components So had coming below and forecasts. know, a tend that by customers small weakness weakness, little business, of in of expected the demand it, being which, saw

William Stein

or ones China -- And that's and one the in one I the assume U.S.? the in less that's

Thomas Edman

really, Well board. the pretty across much

William Stein

you year. And a there only related, is cited weakness? and that's, expect Okay. investors say? Or there's this market cellular be sort the seeing would that you for below outlook, end that that something I different be expectations, acknowledged think, of broad-based a the you're guide that investor tariff then to anything Is more unexpected timing let's

Thomas Edman

Yes.

So every an yield to yes, earlier and as basis, interesting. one remind we versus expect from forecast look designs we what only flat you, this higher we able When is QX the as happened where earlier we really combination at come start And other that markets were and year, and that a market grow performance last cellular. expect Those year-over-year last and year, QX. our we start. year cellular to is be, had up year QX that automotive of look is We than at we I released The level. you had forecast on continuing where look to Will, year-on-year ramp a at would we And that. were year-on-year. short are our to just market really is forecasted relatively

unit we ramp. out third that, of in were as the higher quarter to portion so the -- able because And volume of we push

with the more fourth that and then Korea. into base the China coming quarter. that the we're demand combined two out base softness would of big customer forecasts customer of then conservative course, from factors, that leads be That inclusive some Of factor Greater seeing

William Stein

Thanks, from it me. That’s Tom. Great.

Thomas Edman

you, Thank Will.

Operator

question next Research] Our Fox comes [Cross from Steven

Steven Fox

Hi, good afternoon.

on guidance up half XX%, I last for the Maybe if add that half for compared following numbers roughly But second the including up year-over-year correct XXXX, on my half. XX% your down numbers if my wrong. Just answer. of you're to second are me the XXXX --

a demand? else So related playing then understanding that how all factor's on? that or XX% loss we I'm is that. share Or the there touch is And or timing is pricing to something quite can out -- that not drop, within all market

Thomas Edman

Yes.

about looking, the you're you're that -- off -- the that of when -- I quarter. higher if at last you're need So your -- wouldn't I QX. what yield in I of if remember the you terms were of in far don't we shipped. occurred QX the being third volumes But think too unit to you was talking And advance estimates, is there looking Steve, remember because technology obviously, year, major starting year, last shift from we that ASPs challenges, and

year if went we yields, levels, higher you're And start. ASPs at technology new at a levels. and quarter QX. as looking at absolutely with year, performing yield very It's into starting dropping would be earlier last we a higher we had challenging so ASP nice third This

unit that adjustment that absolutely, ASPs. see QX You're of difference But into exceed less going the to on noticing. going an you're volumes would overall,

isn't there for ASP there is So factor -- sure. an there,

into customer we in manage to we very we're forecasts. It's year, conservatism for understand We'll what to be every we then is in we'll of see next But to going and to of tell, would certainly -- perhaps other we well kind mid-December forecasts there. until with managed, frame. year. to If don't are like but how again customer inventories as time refer what optimistic -- looks sell-through the first piece as to hard that The forecasts. really ship really the sell-through sell-through we happens more as XX% have see-- quarter those head what us grounds have what

Steven Fox

what I you're how But can just are not And you type on just numbers I cetera. us follow you helpful. that a to to That's being a guidance, Anaren et in for we very organic Okay. sort revenue sense you expect think, specific, the then rate trend up, in disclosed of tracking growth business? QX of of Anaren QX? of that know terms in give as off And

Todd Schull

quarter, in organic growth broke business, think pipeline points looks we business, I the expect are about integrated -- kind which a them within them which terms of as their X, of our very his grow last business, It I in guidance Their be the in prepared Tom Tom bit think, low you said and to the be time than will, can little our contribution, should revenue general, come as is of of rate. the comments, think months historical operations. in a program to little different apart and expecting. than pretty did the orders track we've much several to we a quite faster what got expect we our better be now contribution organic for business acquisition, pretty in. growth pipeline. a Anaren $XX our X disclosed, digits. what of than revenue gave into million bit a But They so the a because we we the highlighted quarter from their into that. we integrated couple to comments, They've guided mid-single units we better if them time lumpy would good were rate, of little bit the along But ago, that in I encouraging

Steven Fox

So dollars, right, that if revenue in in to more of dollars generate that math going than doing I'm terms QX? they're the QX means that

Todd Schull

to that not be we're It'll close. giving - be precise. going relatively That's

Steven Fox

Okay. it. Got you. Thank

Operator

comes question Company] Sean [Needham next Hannan & The from

Sean Hannan

Yeah, folks.

just same as here, automotive. primarily follow wanted cellular as horses up beat some well to topics, the of to Sorry some dead

to ago. about perhaps Tom, a thought we process little moment more. talking bit comments throw me as see that can so it, explore we if made Let a were you the just and some

for March still guidance, setting well on have conceptually in less in weighting, should terms we of And shift realize that about downtick when there's into ambiguity, of the thinking In impact I shifts we much enter we fundamental some fundamental I realize sequential ultimate take. you're not up the have be of but consequence a we XQ, XQ a but a quarter? giving terms terms this --

would help you think that. I to understand So

Todd Schull

So can been there. publicly out has all I really what comment is on

end response -- and I the we to then and we year like. time quarter in the of our quarter did natural last out think and the that run critical -- And really cellphone. our that's at looks our say inventories But absolutely is into meeting supply congratulate will as the we that for to what frame, we March think certainly, to team visibility carefully can tremendous very the in commented of able that that the what team on a us I level And think I better door. that's to would did job satisfaction. push first -- third ultimately, have be of it call, managing performance. And much channel terms the into business, the that head the Sean, of that the in dependent were more But is volume in that I production be And all again a on sell-through. customer quarter on careful managing the in as December I base.

to of understanding like area. -- lastly, lead just then forecast the where markets. of what like have I'd the moment the see will you cellular And we're forecast giving our reemphasize And looks again. in one the of the in us. an it's of view that best one It's just We terms we

very in have, the And again, We the will that been seeing base. involved end we're the other business terms over on for growth in in. and steady QX pay that strategy we're of off a years, diversifying that us in our markets with

Sean Hannan

all Okay, right.

sell-through. about, Let There me we think over of see shift segment if end-unit I'm content that little to a a in are well. say, around the let's that elements just have as where I as dependency beyond number ADAS, growth confused can automotive. we

standpoint, get if for our clear we pickup, base perspective if now And a at customer back And an ADAS some so we're did getting resolution, very want a feeling can applications what to commentary of not growth terms around is aggregate? right then broader look I'm into see in any on sure from shipments of resumption from I'm like? aspect. that what

Thomas Edman

space in Yes, tie Thanks, XX% technology if printed Sean. revenues at our advance And the the you XX% boards. split, between automotive of -- -- circuit automotive our area and to PCB RF and look Okay. the the primarily that inclusive go applications required applications also has the for the grow. autonomous of are boards sensor area And continued that those ADAS. into build, required for that absolutely we camera and vehicle, are required that to

it's to and more the XX% product growth from conventional both mix, area growth. board XX% volume our overall As benefits electronics of content unit circuit printed

is compensated that XX% year. into just by on wins. that's of to side. -- content. And that That in it's the carry certainly volume of I will area. that the electronics So I grow. for design think It's -- That the volume We where next continues you're growth automotive to some in sales highlighted the you're our seeing is softness a we the then -- what see we're unit seeing XX%

the down of us the going E-M for was -- business, what's on Solutions business. a masked really side then, of nice rest that's the PCB weakness really of So balanced bit affecting on to of by of which there, PCB side in the little contributor the growth as volume side. in the the unit I the course, biggest is third mentioned, the quarter And which overall,

Sean Hannan

for the Thanks questions. right. All Okay. addressing

Thomas Edman

Sean. Thanks,

Operator

comes question [JPMorgan] Paul next Our from Coster

Paul Chung

is This for Chung for Thanks Coster. Paul Hi. on taking my question.

guide I some so how for Sorry, should So for XQ? we visibility of missed Anaren you XQ, X operating now quarter think margins that there. and have your about OpEx

Todd Schull

to Our guidance $X.XX basically $X.XX. EPS was of

let's probably neighborhood it's kind If reverse a I margin be the out in come all say do of you XX%. see you on with here, well, the to that, going that's be -- to of to should want of engineering going around

it a at we're that the some from challenges down there. as last we highlighted is year, looking So bit of

take obviously, you top of about cellular. EPS, we're reduction of I million, in at flat neighborhood midpoint a seeing year-over-year that looking terms about, of looks our Revenue terms $XXX talked we've in said, if significant the the on we're just year-over-year, The the down in relatively challenges that In million like as cellular, $X.XX line, year-over-year. of $XXX somewhere we're but guidance. under about

offsetting strong that with from so Anaren. And contribution we're

So then our is seeing other year-over-year. in several Computing that Anaren of is we've the And up about end business that of two growth acquired. great markets. thirds we're significantly

up A&D significantly so without is year-over-year. is significantly. Anaren contribution the A&D, core Our MI&I up

the business. good then seeing fixed our have and infrastructure, mix a amount you profit it's line flat which the significant get to we're X-edged revenue. capital When revenue on cost across of we is investments, In both of -- high-tech ways. It's our equipment the breadth works sword. the midpoint, a capital growth business, So of at relatively

get end the in cost way particularly fixed where margins margins our up And seeing the you on are business way some stronger margins that on the you also. incremental we're we of based. disproportionate On higher way to incremental in terms the up, of technology a in hurts you way But cellular our some leading perhaps down see down, production other because it have where incremental our markets. investment capacity, the the of on

high-tech roughly And really $X is cost facility higher utilization And that of -- QX It's is higher, a QX. really then softer gross what's is or the our so usually as and legacy their margins op revenue, business. about really, different margins It's we negative our not highlighted our component that if than at in the hurts profit. with structure in higher. that mix the at core year-over-year decline rate our a softer. us you is Anaren is are And it little that is business. SG&A that business margin, contributing to that causing Their to -- incremental us year-over-year have utilization that's what million will. of gross their second incremental business and also And the are but that

on adds acquisition. in And the Anaren so SG&A through that up -- we're year-over-year basis, primarily a

Anaren the it's high-tech acquisition. look operating So really the cellular that And the if million half capacity our model half by SG&A business other utilization. at manufacturing you is driven year-over-year with or decline, $XX of profit of

Paul Chung

you you margin achieving that from, should not that moving out you're then of to throughout would year, visibility some if you. margins the does scale of then year some -- that And XX% kind is 'XX, think XX% seasonal about operating And pushed that bit? of in into Thank little Okay. with how cellular fiscal kind now benefit Anaren? a get the we your range have change

Todd Schull

good QX room say which look to know improve. don't I at I a would XX.X%, QX, we if we that and very that. mean, were was you

which As have volume. end different that years is overall Tom's we perhaps in terms cellular talked past markets the certainly to, QX it -- market, of X in than was this

you QX happens that I if what to jump in look see our at to historical -- want in with to pattern, QX. to have We tend and peak QX. don't QX you and

different and to cadence going Not You'd that softer QX. in see cellular coming do this market. a dance we're And QX sure then if you have a year. again our

it's suggests to, in this more see quarter. really, which is certainly just project to As us call be until sell-through information might going, really is bit which we until how are that. hard that potential. won't tightly, the late There opportunity, a it's get but we that activity on Tom there too Things to managed alluded early being for on

those going conjecture does rebound the lot Is business the the of far bit, to what Tom's relatively ahead -- little flat? is to trend automotive automotive going the side color of how or to seeing a -- our trend? on continue. growth in the which are in aspect business, business. is volume going other continue things. that offers which areas or Tom very the be given Is attractive That higher of this though that key aspects and electric and of parts we're are seeing. to is that project messages on right the of going to stay -- terms unit to The get or it at an to of is of the on growth be we is volumes too other want ourselves don't certainly that. and to to point. of the and What We vehicle X offset our now -- connectivity has element a that's the How trend's unit infotainment that those alluded some really hard much in and ADAS that that What's systems of to through technology us, vehicles what's has

quarter beat based say. little now. horse in consumer seasonality. the Really seasonality not I pronounced been in do subtle ebbs as a right Chinese another the has business. When markets swung to big has or or business. it or in highlight the terms picture, hard trying provide in mobility There's summer Year And we've New think it's So we that and death you vacations to what one at to look on it historically our of flows of end information see most business have our

So cautious interpreting be year in your I'd next about seasonality.

Paul Chung

Thank much. you very

Todd Schull

Thank you.

Operator

comes Sheerin from [Stifel] Matt next The question

Matt Sheerin

of back handset questions to been Hi, guys. answered just the the Most business. have here,

guidance beat You this XX shortfall shortfall. million still, by that that $XXX big quarter. or talked I so, XX about million you And September or know but million

you your But And in the to had and like pull-ins December quarters. seems seasonality XX% you so up the talked customer, you expected, XXX% I there. that guiding some were also of each it September about previously large think

you're then talking about customers. Asia So -- and

big that So it that come is you've how of something in orders the Or is you is in? where quarter? customer? that last seen the the And the something just through saw you customers the smaller weeks of much saw that couple versus

Thomas Edman

only in guide we terms - - the quarter of X at the a Yes, time. so yes,

Just want to be so... about clear that,

Matt Sheerin

for December million shortfall year on you quarter the for could based But you you segment. the that's I'm the handsets, guidance for to your talking which the about. back give annual guidance And the about got did that into XXX that

Thomas Edman

versus we Yes, half This forecasts. market we -- QX, let what see the -- not ramp the annual ramps QX again But highlight We don't of we're give cycle. and at would started of that in we greater long-term with that but provide we line the me dynamics and or guidance. year last a in this shift, year, key the in leads be ASPs started second again, year higher talk whether with terms elements about are year an year earlier the than technology yields; ASPs less which a yield. last at start we year of where pronounced difference to -- this

million while perhaps seeing why so, uptick in unit of that's QX, volume higher you're a or uptick XX that's you're So revenue that. than actually seeing a

second they forecasts time through conservative get on a sell-through see is we go -- the updated in The receive sorry the forecast more quarter. generally the weakness. frame. element of XX% China and saw that really and end we then XX% what kind certainly that end phone We our you And at And than what for is Greater means, about feel cycle. generally a as mid-December by And factor early Greater Korea to China last year. we where or is last of market of overall cellular that's then give the is Korea. really represented

so also on weakness quarter. there into fourth the we seeing impact our And has as an forecasts go

fourth here in combination it's those three a of the quarter. that seeing we're So elements

Matt Sheerin

Okay.

kind were the like of board across then, okay. forecasts sounds weaker it So there the

Thomas Edman

Yes.

Matt Sheerin

okay. it, Got

from that’s it Okay, me. Thanks.

Thomas Edman

Matt. Thanks,

Operator

Maynard [Operator next comes Instructions] from Um. The question

Unidentified Analyst

it seeing surprising. increasing customers we Any some there? the why least I'm if market seems softer. there a the units. be had to EV Are any of Because U.S., inventory? Hi, in wondering color share Just you of thank as was that just at Or sense market little whether have should looks, you. amount sense any shifts?

Thomas Edman

want pretty this, a it's our Yes, to It about happens our part mix. profit on a you business, E-MS because area. is small that a think contribution, over-exaggerate business that good -- just portion of automotive of relatively, in I don't

the numbers overall, a was to while. service China tend on And it of our to if areas. smaller looking management So there in are starting side. most that energy growth we in tend quarters. every U.S. you're demand goes and -- battery but the we then This swing does one once those into -- companies the of side, up The at EV storage product

sales was we were in were that I the just And some we was think there across were was with really causing unit I customers shifts to weakness pretty to And be in customers. seeing forecasts that, were are smaller China, and unexpected. board economy are If balance so sheets. again that think -- what that point affecting seem the in this certainly working what tight our and I overall to -- just these

the some We application areas. again, saw particularly causes and in swing terms less. a bit side, start-ups the in And so movement quite of storage energy a that U.S. their of of some of forecasts. there, on

Unidentified Analyst

auto to of have terms that speculated might taxes be I'm business? -- of China's lead how in curious time visibility the do in And much And growth. reducing Okay. you help because

emissions, sounds temporary the like more WLTP testing a than settled more of OEMs some something And longer issue ominous term. have which issues,

time So I'm just that have wondering visibility lead you how much and into do business?

Thomas Edman

Sure.

forecasts, down purchase what come on the was business, We But I quarters. the forecasts out side. And the expected impact On our getting within than relatively so. the lower go unit from than has PCB time go side that just the our been generally of is good. But to flat forecasts think it's inventory on we several that are pointed out customer been in going out have slightly. of Those X Actual PCB receive I sales pretty -- less months that that side were of that pulls lead forecast. quarter. been and orders or to has think led area, hub that again, will a I certainly -- that's mainly bit

As of big piece in business. growth to terms of longer the to going our term, content. we going innovation drives continue what the continue is to driver to It's electronics look be be

at We've good a continued quarter. to to forecasts I so what there, to as be continued we And well. there seen see look appear haven't strong we've -- think

continue. That would for the see to hopefully to on place, to lead electronics of the side consumer certainly more continue have that sales these that and view are that what are be growth what climate my of in will measures yes, it's sales what on a that's the -- probably put unit automotive much We'll going us, we'll there then -- piece seeing else. better see unit impact stimulus being the by this So of of are is anything caused softness a we some demand. than

year-on-year in So we're with the -- looking QX. forecast, at we're again, our flat relatively

I from QX And go stimulus will in upside holding think other still that the up. put we it's see and place. some we're hopefully, that measures that that pushing, into represents as we then be measures

Unidentified Analyst

you a if just I driver talked in the as in lastly, about then could complexity past ASP. And smartphones increasing Great. to

maybe of at in As how we not also have in terms it to reduce Do you market? cost? think the sort of reduce fixed your out to the difficult going look functionality? units, be secular amount you how should the we're capacity but would we of peak, for about maybe think forward, then just And

Thomas Edman

Yes.

the is a printed around usually road or PCB density circuit continue see to technology of the And that standpoint, because So maps most first think not we innovation probably comment I board to there requirement. be that tough see, the will for device me of certainly, demand or the that advances difficult the on. from or the that going stimulate the to answer, we're right, innovation know to circuit the from area. part question, is to But I part Whether oriented of continues here. in smartphone really miniaturization

look So change the at itself, all size much, doesn't circuitry board circuit we board that as density continuing see the up. to requirements, but we printed go

business. our And will in so movement that technology drive innovation ongoing

our be cellphone look product they to -- you use will as technologies own on more customers their or picked will and business advanced the And even the markets, then If more use shrink the -- facilities, and customers more piece package working diversifying focus some our help China the up advanced particularly Greater are in on because advanced look our to introductions other and technology our facilities of to by that at in continue themselves, us of of and Korea, of as miniaturize level terms the as automotive are chipsets. there technologies size as of load, in the advanced frequent.

-- are of for in aerospace to it's But -- a come this in in to on in -- that camera technology application, other to demanded and of and a participants are will in area requirements same kind And there's and other that always markets requirements industry particularly we advanced that to data adoption whether in kinds in There's in infotainment miniaturize. always for chipsets and drivers driver And applications. it's a to order the the advanced that more it whether occur server working and other In the area. whether drive automotive, allow in for -- automotive demand boards. chipsets. the those reliability So in will all we is it's that new automotive optical markets, in networking, defense, will occur. -- use driver are

That's that And trend of really capacity and these our terms will markets. see other so is driving we same where in advanced absorption focus of technologies.

Unidentified Analyst

Great. Thank you.

Thomas Edman

you. Thank

Operator

remarks. this At time, I Tom turn closing will back for to the call

Thomas Edman

and of discussed me summarizing call. to earnings record one, the the Great, just provided we the guidance ahead by close finished third of that Yes, delivered we've we quarter investors. a we let that thank some Number and points for you. in

We continue our and differentiation. on of execute core to diversification strategies well

thank and goodbye. We employees, differentiation are from continued finally investors Anaren. long-term for and to our excited our of contributions, revenue many growth you our synergies And customers your by in ongoing like arising Thank I'd closing, of the the again, integration your support. and certainly and drivers our for

Operator

concludes this Thank gentlemen, you. today's teleconference. and Ladies

may You disconnect. now