Sameer Desai Senior Director-Corporate Development and Investor Relations
Tom Edman Chief Executive Officer
Todd Schull Chief Financial Officer
Matt Sheerin Stifel
Maynard Um Macquarie
Steven Fox Cross Research
Call transcript
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Good day, and welcome to the TTM Technologies Q1 2019 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 Securities and our recent differ one due explained and could and most more XX-K or uncertainties, annual Exchange results Commission. from with statements these to in other Actual filings Form the on including the These are management’s based expectations of assumptions as forward-looking date of statements the this on and presentation. future circumstances as to any of TTM as revise a of law. does or result not other publicly undertake update events new required by information, any except statements whether or obligation these refer risks Company’s Please the in that affect TTM, statement XX-K, to on XX-Q, registration and reports S-X other found be SEC may on disclosures regarding Form the X-K, filings. the which the Form may

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

Tom Edman

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

the challenging markets. I would within Technologies. for TTM non-GAAP range, a weakness in our our quarter like employees end despite First of during two EPS material and revenue to were and guided some their Both our contributions for thank foremost,

impact, below to of would saw results have discipline. performance $X.XX was $X.XX, high our repayment range. due We negative defense weakness towards midpoint diversification, of end from because loan. solid foreign We operational these of commercial EPS strong the operations cash the term been markets offset and our in Excluding that a We revenue end and in financial the automotive market partially solid of of our aerospace and while generated of million quarter our in exchange, and the continued guidance, achieve growth cellular. flow $XX.X the

commercial markets, forecast and differentiation. While as our some end continued goals of cellular on excellence, particularly operational automotive. our in We in remain well for and softness focused diversification discipline, QX, reflects as strategic financial

as three, adoption our of path of connectivity. the Notwithstanding automotive markets. autonomous growth. PCB increasing vehicles; content number electric Number driving number one, and adoption advanced increasing hybrid and core and market technologies. We due on view continue see safety to number automotive We the global we a two, four differentiation automotive driving; end advanced aerospace increased end key four, vehicle infotainment; weakness, driver the and demand growth content electronics near-term and in and towards defense megatrends

the base. customer As by cause driven for longer we are today, some our short-term seeing trends term pain global these may transition

world the from combustion transitions internal away As engine. the

the innovative amount business to tremendous a continues Because existing be adapt customers, new electronics with technology industry. of goal building while to world, customers. this innovation above in Our also set our the focused there a trends, will support as they new automotive to of of be

quarter, related. designs design XX in future were the the for new revenues. well total boards to which which In This well XX We market, XX won engagement robust, remains customer of automotive our ADAS product activity begins wins first before design Our ramp. compares that won this that serve we in of revenues efforts proud and QX year year employees contribute in our defense XXXX. future our will total designs and also I Designs are years. of last fourth am winning of aerospace XX in customers. the to quarter automotive

Our QX, major year-over-year. new a programs. revenues base Anaren, level across grew This organic with revenues supporting focus designed by and on print a customer XX% build X% of a specification aerospace both achieving team’s our grew record year-over-year strength and result defense in and defense is dual to requirements, broad our to of

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

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

our to markets. end I’d Now, review like

quarter market last represented defense $XXX XXXX. year end For pro versus was sales QX $XXX of QX first the to XX% in of aerospace and TTM, XX% XXXX of million in at in Total sales million, total backlog compared XX% QX program record and a new of of the a end sales, backlog XXXX. $XXX and forma QX of of million QX

XXXX, XX% particularly and Networking year-ago market sales. quarter XX% first total accounted XX% development. XX% end XXXX, XX% In XX% revenue sales of sales to than revenue. a during in for sales this of softness XXXX. expect down to to the compares in of the due and this segment quarter to weaker QX, fourth compared in QX due sales basis, sales Automotive Asia to in year-over-year of of We XX% global about in of QX of up of the the the Europe. inclusion total we expected and in represent were wireless communications first during quarter were be to early infrastructure year-over-year the quarter this of revenue in for from our demand, we stages quarter first XG sales XXXX during related robust, of represented Anaren, Automotive of on the expect and quarter the enjoyed of fourth XX% XXXX. where Dollar

to and We instrumentation the saw first quarter in in XX% expect contribute end in in customers sales compared XX% medical customers. of of of and The in year-ago sales We industrial our XXXX. QX. quarter instrumentation quarter XX% strength market in total total fourth medical weakness automotive larger to the industrial contributed our the and XX% our

Sales to fourth peripherals end market to center XX% XXXX notebooks but this customers. in XX% expect of total QX storage revenues. we quarter, quarter in of sales and XX% be compared in XX% quarter of XXXX. computing second data the in the end first high market represented saw of the and semiconductor the in For in weakness We strength

to decline The primarily and cellular was of approximately weaker our QX reductions in the XXXX in expect QX end first in The of this second and sales. inventory quarter X% customers. We to XX% quarter market revenue revenues of demand represent to accounted due phone market for XX% compared end XX% sequential by of XXXX. in cellular

inventory of We represent digestion cellular we expect X% the the before to in new in half continue releases model year. of to QX see second as revenues

Next, I’ll from cover quarter. some details the first

and accounted in the technology quarter the includes and and decline HDI, During of substrate The QX. approximately year-over-year rigid-flex, RF cellular our softness XX% components, This the subsystems by which were business in and our approximately end XX% market. Company’s revenue. for year-ago sequential XX% advanced quarter, in compares to driven

softness in technology and quarter year-over-year markets. declines XX% that customer business opportunities new to will in Capacity Asia XX% XX% We to year-ago to our utilization end were in in Pacific our in due compared design activities engagement increased QX commercial capabilities new was in pursue The the are sequential and leverage markets. advanced and continuing QX.

America in utilization and was capacity XX% XX% overall in QX the Our in in XX% year-ago to North compared QX. quarter

end market in As utilization North our strong A&D drive continued to levels America.

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

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

PCB our Our visibility operational some in to continues weakness discipline, TTM’s possibility our second months X.XX the the markets three by the I’d for we emphasizing the are commitment conclude of was while limited, April is ratio commercial to ending half. like that book-to-bill Xst. preparing into for

efforts we with the experiencing result, a to footprint normal overall cost manufacturing structure to addition the our we end As across realities markets, our our the cost in demand aligns well reduction reviewing are that address in are markets. commercial ensure to softness our

and from demand to is operational period customers. longer diversification, focus softness pay strategic our investors an stronger emerge even for on our position improves. cycle to this differentiation their TTM and will goal TTM, off our discipline of the as Our in our customers term, In for service

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

Todd Schull

afternoon Thanks, good Tom and everyone.

per quarter in $XX GAAP loss of the of quarter growth of A in XXXX incurred to the in and in net quarter compared sales to year, of or $X.XX basis, our XXXX fourth in the For million $XXX for and net compares declines partially diluted or million XXXX the offset of our compared and the market. of This aerospace and we XXXX quarter in commercial On XXXX. markets share. $XX.X share defense per or fourth last end to XXXX quarter sales and first diluted Anaren fourth quarter $X.X the core $XXX.X $XX.X by million in XXXX. of was quarter first was million first net year-over-year sales a quarter the million per income a of of the GAAP million inclusion operating income in $X.XX $X.XX the of were compared the first net decrease first quarter share $XX.X million end first in of due revenue million. million the $XX.X to $XXX.X

of will reminder our to related of our on The benefit excuse a of due release QX remainder a me my – allowance. non-GAAP included financial valuation a performance. comments million, tax As non-core the focus $XX.X

infrequent related associated this Our or non-GAAP of such unusual sale acquisition certain our business and as Viasource expense as well gain tax performance items. the the impact as excludes items, on other quarter, costs, items these non-cash of the

the non-GAAP or in The net and fourth due core of and marketing in X% $XX market. the net management, XXXX. year-ago quarter the sales of quarter margin first versus of compared increase by million to of see to tax lower in valuation we A&D of volumes provide sales, expense, of ongoing XX.X% partially the insight and a investors exclude primarily of and financial Anaren changes in the million better XXXX fourth Selling performance. first $XX.X million XX.X% Gross company’s the quarter. $XX.X or eyes the to financial in to present the the and quarter was market, information to in quarter offset first sales allowance. Additionally expense gross company into end fourth quarter the XX.X% tax non-operational in end enable X.X% or release in such margin through of in was the the year-over-year as our addition cellular X.X% growth our our was We in

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

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

last we of This loss $X.X net or foreign to loss the brought of Government million $X.X recorded $X.XX net million to approximately incentives year. the million EPS. quarter, losses. compares QX a of exchange in During $X.X

XX% the Our effective was first in tax rate quarter.

in and first net First XX.X% or was of of from net net EBITDA $XX.X $XX.X EBITDA sales, income versus flow or EBITDA $X.XX the XXXX was net per million income quarter $XX diluted operations $X.XX first of $X.XX XX.X% compares million use last diluted $XX.X per compared or same fourth net first net million year. This XXXX cash of $XX diluted million or share per the was for of Adjusted XX.X% or was in or million sales. Cash quarter to of quarter of XXXX a share. of quarter income In the quarter fourth quarter, million share. million $XX.X sales. $XXX.X adjusted million adjusted $XX.X first the quarter quarter with

the total million $XXX.X our for quarter, million to $XX.X the million. additional the Depreciation quarter, at quarter of first Cash acquired fourth repaid we equivalents repayment for million bringing first Anaren During we quarter. quarter spending versus since end an totaled Net capital – in million was the $XX the also acquired million. $XXX.X was the $XX.X $XXX debt, since $XXX debt of we and of million, cash Anaren.

Now, guidance our I’d like quarter. second to for turn to the

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

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

Our our shares includes such with securities, share as associated count in dilutive bonds. issues, convertible no but options our

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

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

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

expense We interest $XX.X be of compensation second million. expense Stock-based about expect $X.X and estimate $XX approximately intangibles million depreciation the approximately of to quarter of $X.X million. during record of non-cash million, amortization will expense about we

that the loan Media Technology announce The That Insight in June in Technology in London XXth. questions. Conference like The XXth. and on Corporate remarks Telecom prepared and yield Conference now, Barclays June our Springs Conference on Media we’ll X. to for concludes the participating The Sector York high Boston XXst. open Cross Communications New in City on to and and like in on XX Global I’d and Boston Operator? be the Macquarie bond NASDAQ conference in Day I’d Technology May JPMorgan Stifel Colorado on June May line Finally, syndicated


And you. Sheerin our comes Thank with question [Operator Stifel. Instructions] Matt from first

Matt Sheerin

you and afternoon. Thank Yes. good

that with lowest share a but I bottomed that business. that June and going backlog look of changes visibility, content. least any It any typically, segment have Just or lot at XXXX. like revenue for question is the the half at going to And And lamps. indication some still since start growth sequential regarding things that a weakness customer typical the there’s any second know just the much top is here be versus for into your see to second half? seasonal How as number of cellular you you start see looks bookings in you signs should that in of to and some gains,

Tom Edman

Hi, Matt. Sure.

this Let me one. answer

QX the of on and on on And consumer our end that side. we’re cellular QX a course, production tail side. customers by the that usually the the of cycle sell-through experience levels So, determined

of has for. this think a been the that seen I sell were major through certainly has not cycle, they our where hoping kind customer

channel, and works forecast levels to QX have inventories think we now as our we’re going and well, inventory. QX QX I to been chain assembly as high really the as really in be down through production very customers’ low

Todd Schull

what So, in that’s is forecasting going to really occur we’re QX.

As far the good be new can. much to in cycle yields, similar then fourth that by past everything determined still with quarter going on half prototyping new be in lesser the we goal goes, phones, third to we’ve the build years, to what very we’re where into this back cellular and on in continue be yields forecast year a of phones as will for looks QX a looking pretty again, ramp. the output be shift seen very the production we’ll really shape technology but our at optimize and is to to quarter that cycle next The we’re building so

nothing different terms what So, ramps. as past in compared in half see of there the back the to year we of

Matt Sheerin


guess. off I the base Just of lower

Todd Schull

correct. Yes,

Matt Sheerin

smartphones that utilize the very two high-end are end about How PCB And Are use markets? about to year and then other technology there? where within next wanting what markets. talk you also – talking opportunities for Tom, or positioned we like that you you for end substrate

Tom Edman

Okay. Yes.

it XX really in to microns to get allows this and technology So lines terms like do customers spacing. our below within PCB seeing cellular, down is of what is substrate we are

denser So, is see high-end end Within proliferate circuitry by to that be we’ve through largest to certainly and trend our already customer, beyond general much other going requirements adoption started that XG. will phones markets. cellular, enhanced for now

with required that as will for be certainly other XG expect of applications that Internet We and Things automotive. including type the chipsets new applications with

micron and start down moving to again, below see going to lines level. that We’re spacing XX

in So, and into adoption the type Things where trends communications terms lot there of of again, a promising the industrial MII goes in automotive, in certainly in Internet longer-term networking of are area, applications.

those or to new by of that chipsets coming that seeing start and movement again, you’re will by So, enabled the chipsets new XG. that all being being requirements the come with going are of required

So that’s sort of where we sit today, Matt.

Matt Sheerin

All Okay. Thanks lot, a Tom. right.

Tom Edman

Thank you.


Thank you.

Our next question Um from Maynard comes Macquarie. with

Maynard Um

Hi, thanks.

why versus side, more based? a you or to the broad in market start around the X% see auto large toward the fairly we On electrification, Are XX% luxury to trends QX. when that year-over-year kind there I the of could and were down, guess I maybe And more secular think you particular is such any segment exposed disconnect gap you segment you given exposed or narrow? to down

Tom Edman

in the we that gone as what has area about particular Maynard. here our XX% Europe, boards, printed conventional being auto certainly, Thanks, by customers’ The the which revenue And Sure. what of circuit weakness impacted our side, is, we that – in a year-on-year exposure from demand the standpoint auto been look we’ve side. as and seen is approximately shipments, European on through and primarily we’re for ship and area. the diesel talking we at on have where particularly,

being down, of combination our together that certainly, an shipments. European impact demand terms diesel course, so And go we they and demand of in had

talked be QX and have versus in about particularly other and as to in the we’ve weakness and well prior year-on-year The that the seen China Asia, there, where in we case impact continues that quarter. probably, weakness quarter-on-quarter

So, those we particular regions, the where concern. have two are

on that, a is quarter-to-quarter if a we of European in one anything the see – regions basis. did think takeaway ameliorate on downdraft the side I terms the those bit positive

quarter to worked have for as would that they that But year, inventory the was we worked this we as of would the be expectation side quickly inventories that had the we look on but half of been both European hubs European the certainly, through back hasn’t expected. the – we Asia start inventories towards so and And looking our what down. a lot as the occurred had, at expect that had would

levels start real we’d demand see to So, again.

sort our expectations year. through the the would of one technologies the really as certainly the is But shipment conventional trend – The pointed then out, you you where from agree the where I promising. a to of we standpoint, bit of ongoing electrification a – I XX% automobile And be that’s of go into course trends the with very as So and see an area that advanced unit that little our production. of and longer-term on continue total still small. is a go

why from a And larger side basis. so of that and impact that’s year-on-year board conventional Europe you’re downdraft the seeing again, particularly, on a terms in

Maynard Um

it. Got

talk Okay upcoming ask you that’s your of going structure, or talk helpful. what maybe of And about that question that then cost couple improvement I of years. and are reviewing about that to segments can segments you you given obviously, big see maybe next some can see some some the structure just areas the business of of kind when cost growth drivers

potential how wondering making I’m cost optimization that look fulfill to that sure have balance you to growth? still infrastructure you’ll Thanks. So, versus

Tom Edman

in exactly, they’re at and we’re of the And performing, Very at how said. we utilization with customer and charter looking our Yes. obviously, footprint are their always facilities. we’re looking we looking those we’re at at base facilities, looking the well rates facilities, our analyze XX how

a maximize look facilities efficient, what DNA more I can you can where really we operationally to down it’s part performance utilization in So, we can of when That become our of are we’re even rates. tell how operational is and facilities. terms our on at we of It our involves emphasis that chain means absolutely are how of critical. the purchases between material lot we maximization of put handling then for a and yields producing, our labor lot supply what movement

process. going – will take longer-term take requirements, So, as we the and that to same footprint started we looking we discipline that look across our same we’re to at structural

how the look at that the is transferred. footprint, is is how that we customer what forward As we charter be the could at of customer facility, base look facility, base what and our the

a we of process are looking that reason And obviously, So follow highlighted. are at – what terms and requirements highlighting us you’ve to very exactly that we customer that we end our looking are for of longer-term at in the base in. here markets important that footprint really, for is

needs. out that period footprint soft capable come of stronger, with a anything to if we standpoint the optimized that technical customer from a more can So be meet


[Operator Instructions] question Cross you. comes from Fox Thank next Research. with Our Steven

Steven Fox


about noise. in I’m the I just your of context following the that Tom. all that guess, to understand now. Sorry rates on of trying utilization where up right are background

Tom Edman


Steven Fox

hint and or mean, go that you back And the you what’s on all us give expected can down half, the think mean level, coming they something you comments where could the inventory the a I so that? improvements. writing second or far? like comfort you’re I in not assets given so made

Tom Edman

volume those facilities. And But that I’m utilization with. rates, with our high QX a facilities, those XX% operating we’re period, the facilities; we’re we need low QX, highlighting Asia Steve. Steve. great in Sure, be America level look where and rates, above as isn’t to We facilities comfortable know, Yes. Asia we’re when look our mix to North our utilization certainly, at as really, measure at utilization when you facilities, talking

to past, As XX up range. years in and be the you know, them been we’ve move above – in even XX% we’ve able

we’re to strong above suboptimal QX. a coming will know is right So, marker of cellular back XX% in sort now. we our Clearly, being that where operate facilities. like We of be QX,

facilities as will be certainly those we into optimized come So, QX.

utilization impacts parts really and the our about at other in rates. business those commercial longer-term looking how that the of markets it’s trends end and So, then

Steven Fox

real related weak? business, small, And those I was side it’s auto that functions and of wasn’t board weakness, of that helpful. saying electromechanical it the terms know in the are then the on That’s you weak all quick are Great. just or but of both

Tom Edman

part to a on it’s the were you primarily standpoint. said, business but had nothing And board, we And bit side, of highlight. a a major revenue down not little EMS we from as the –

that really, really, So primarily area. broad

Steven Fox

Great. Thanks much. very

Tom Edman

Sure. Thanks.


this would now to Tom no Thank you. conference And I at for like back closing Edman we to questioners have Mr. the further time. remarks. turn

Tom Edman

you Thank earlier. of we made that like close I’d key summarizing much. the to by very just some points

deliver that the first range quarter. and First, in phase in environment. And relatively cash we earnings was did of weak we the generated guided the for solid flow commercial

Second, And year, you. we like our are to while first are execute diversification, on your – investors and to finally, we our discipline. challenging support. of half all strategies facing our Thank we I’d continue differentiation customers you, the a for and core continued well of thank our employees, of


this Ladies presentation. and gentlemen, concludes today’s

now may You disconnect.