Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• TTM Technologies Inc (NASDAQ:TTMI) achieved revenues and non-GAAP EPS above the high end of the guided range, with a 14% year-on-year revenue growth.
• The aerospace and defense market, which represented 47% of revenues, continues to show strong demand with a record program backlog of approximately $1.56 billion.
• TTM Technologies Inc (NASDAQ:TTMI) reported a second consecutive quarter of double-digit non-GAAP operating margins, reflecting solid execution.
• The company is making strategic investments, including a new state-of-the-art PCB manufacturing facility in Penang, Malaysia, to support growth in commercial markets.
• TTM Technologies Inc (NASDAQ:TTMI) generated a healthy cash flow from operations, representing more than 13% of net sales, and reduced net debt to EBITDA leverage to 1.2 times.

Negative Points

• Year-over-year declines were observed in the automotive and medical, industrial, and instrumentation end markets, partially offsetting revenue growth.
• GAAP operating income for the fourth quarter was negatively impacted by a $32.6 million goodwill impairment charge related to the RF and S component segment.
• Gross margin decreased year-on-year due to continued Penang startup costs, higher employee-related costs, and declines in the automotive market.
• The company is facing challenges with inventory normalization in the medical, industrial, and instrumentation markets, leading to a 9% decline for the full year.
• The automotive market experienced a 12% decline for the full year due to inventory corrections and weak demand, particularly as EV demand stalled in developed countries.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with FORM.

Q: Can you talk about what's changed that's allowing you to smooth the seasonality in operating margin performance and maybe quantify the effect? A: (Tom Edman, CEO) The biggest shift has been improving the aerospace and defense (A&D) revenue mix, which has increased from around 25-30% to 46-47%. This shift, along with selling our mobility business and building strong business-to-business connections, has allowed us to improve consistency in performance. Previously, revenues could drop off 15-20% from Q4 to Q1, but they are now much more consistent.

Q: Can you provide more details on the Penang facility, including revenue generated in Q4 and expectations for Q1? A: (Tom Edman, CEO) The Q4 revenue from Penang was very small and not material. For Q1, we expect revenue in the range of $4 to $5 million. We are working through the yield curve as we ramp up production, and we anticipate reaching breakeven by Q3.

Q: Can you break down the percent of backlog or program backlog of PCB versus integrated electronics in aerospace and defense? A: (Tom Edman, CEO) The backlog levels reflect our revenue mix in A&D, which is about 50-50 between PCB and integrated electronics. As the Syracuse facility comes online, we may see PCB revenue increase slightly.

Q: What are the main bottlenecks in North American high mix facilities, and will they be similar in Syracuse? A: (Tom Edman, CEO) Bottlenecks in North America can occur in front-end engineering, drill, and test areas. In Syracuse, the facility will be built to handle high layer count and high-density interconnect requirements, with potential bottlenecks in drill and test areas.

Q: How are you approaching the impact of tariffs, and what conversations are you having with customers to minimize this impact? A: (Tom Edman, CEO) We have modeled several scenarios internally. Our customers have cross-qualified with multiple assembly locations, allowing them to shift production to other geographies if tariffs increase. This flexibility helps mitigate the impact of tariffs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.