• Net Sales: $616.5 million in Q3 2024, up from $572.6 million in Q3 2023.
• GAAP Operating Income: $51 million in Q3 2024, compared to a loss of $10.2 million in Q3 2023.
• GAAP Net Income: $14.3 million or $0.14 per diluted share in Q3 2024, compared to a net loss of $37.1 million or negative $0.36 per diluted share in Q3 2023.
• Gross Margin: 22% in Q3 2024, up from 20.8% in Q3 2023.
• Operating Margin: 11.8% in Q3 2024, up from 10.1% in Q3 2023.
• Adjusted EBITDA: $84.4 million or 13.7% of net sales in Q3 2024, compared to $84.1 million or 14.7% of net sales in Q3 2023.
• Cash Flow from Operations: $65.1 million in Q3 2024.
• Cash and Cash Equivalents: $469.5 million at the end of Q3 2024.
• Book-to-Bill Ratio: 1.20 overall, with aerospace and defense at 1.26.
• Top Five Customers: Contributed 41% of total sales in Q3 2024.

• Warning! GuruFocus has detected 5 Warning Sign with SCMWY.

Release Date: October 30, 2024

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

Positive Points

• TTM Technologies Inc (NASDAQ:TTMI) delivered strong operating margin performance due to higher revenues, favorable mix, and outstanding operational execution.
• Revenues were above the mid-point of the guided range, marking the third consecutive quarter of year-on-year growth, driven by demand from aerospace and defense and data center computing end markets.
• The company achieved a book-to-bill ratio of 1.20, with aerospace and defense at 1.26 for the second consecutive quarter, indicating strong demand and a record program backlog of approximately $1.49 billion.
• TTM Technologies Inc (NASDAQ:TTMI) is making strategic investments, including a new automated PCB manufacturing facility in Penang, Malaysia, and an expansion of advanced technology capability in Syracuse, New York.
• The company generated a healthy cash flow from operations of $65.1 million and maintained a solid balance sheet with a net debt to EBITDA leverage ratio of 1.4 times.

Negative Points

• Year-over-year declines were observed in the medical, industrial, instrumentation, and automotive end markets, partially offsetting revenue growth.
• The Penang facility has been a consistent drag on operating margins, impacting them by about 180 basis points, with break-even expected by mid-next year.
• Foreign exchange losses of $17.8 million impacted the financial results, primarily due to the devaluation of the US dollar against local currencies in China and Malaysia.
• The automotive end market remains challenged with continued inventory adjustments and soft demand, contributing to a decline in sales.
• The expansion in Syracuse is not expected to have a significant financial impact until fiscal 2026, with minimal P&L impact next year.

Q & A Highlights

Q: Can you explain the foreign exchange impact on your financials? Is it a hedged or unhedged effect? A: It's an unhedged, non-cash impact from unrealized translation effects on our balance sheet, primarily due to the devaluation of the US dollar against local currencies in China and Malaysia. This is not a hedged effect.

Q: How is the Penang facility affecting your financials, and what are your expectations for its performance? A: The Penang facility has been a consistent 180 basis points drag on our operating margins for the past few quarters. We expect this to continue in Q4, with significant revenue ramp-up anticipated in Q1 and Q2 of next year. We aim to reach break-even by mid-next year.

Q: What percentage of your data center and computing revenue is from hyperscale customers and AI-related activities? A: Approximately 85% of our data center computing revenue is from hyperscale customers, driven significantly by Generative AI. This segment is primarily concentrated among four or five major customers.

Q: What is the impact of the commercial aerospace strikes on your business? A: Our exposure to commercial aerospace is minimal, accounting for less than 2% of total company revenue. The 787 program, which is not affected by the strikes, continues to contribute to our revenue.

Q: Can you provide details on the Syracuse expansion and its financial impact? A: The Syracuse expansion is primarily a fiscal 2026 story, with minimal P&L impact expected next year. The $100 million to $130 million investment does not include federal and state contributions.

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