TTM Technologies : Earnings Webcast Q2 2023

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TTM Technologies, Inc. (TTMI) Q2 2023 Earnings Call Transcript

Aug. 02, 2023 6:17 PM ET|TTM Technologies, Inc. (TTMI)

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Q2: 2023-08-02 Earnings Summary

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Press Release

EPS of $0.32 beats by $0.12 | Revenue of $546.51M (-12.64% Y/Y) misses by $6.14M

TTM Technologies, Inc. (NASDAQ:TTMI) Q2 2023 Earnings Conference Call August 2, 2023 1:00 PM ET

Company Participants

Sameer Desai - Senior Director, Corporate Development & IR

Thomas Edman - President and CEO

Todd Schull - EVP and CFO

Conference Call Participants

William Stein - Truist Securities

Matt Sheerin - Stifel

Griffin Boss - B. Riley Securities

Jim Ricchiuti - Needham & Co

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the TTM Technologies Second Quarter Fiscal 2023 Financial Results Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. [Operator Instructions] As a reminder, this conference is being recorded today, August 2, 2023.

I would now like to turn the call over to Sameer Desai, TTM's Vice President of Corporate Development and Investor Relations, to review TTM's disclosure statement. Mr. Desai, the floor is yours.

Sameer Desai

Thank you, Sheri. 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. Actual results could differ materially from these forward-looking statements due to one or more risks and uncertainties, including the factors explained in our most recent annual report on Form 10-K and our other filings with the Securities and Exchange Commission.

These forward-looking statements are based on management's expectations and assumptions as of the date of this presentation. TTM does not undertake any obligation to publicly update or revise any of these statements, whether as a result of new information, future events or other circumstances, except as required by law.

Please refer to the disclosures regarding the risks that may affect TTM, which may be found in reports on Form 10-K,10-Q,8-K, the registration statement on Form S-4 and the company's other SEC filings. We will also discuss on this call certain non-GAAP financial measures such as adjusted EBITDA. Such measures should not be considered as a substitute for measures prepared and presented in accordance with GAAP, and we direct you to the reconciliation of non-GAAP to GAAP measures included in the company's press release, which was filed with the SEC and is available on TTM's website at www.ttm.com. We've also posted on our website a slide deck that we will refer to during our call.

I will now like to turn the call over to Tom Edman, TTM's Chief Executive Officer. Please go ahead, Tom.

Thomas Edman

Thank you, Sameer. Good afternoon. And thank you for joining us for our second quarter fiscal year 2023 conference call. First of all, I want to address the release which went out this morning announcing Todd's intent to retire from TTM. As many of you know, Todd and I have spent our career at TTM together, since 2013 driving this business forward. I could not have asked for a better partner during that time. I speak on behalf of the Board and executive team at TTM. In thanking Todd for his tremendous dedication and service to TTM. I've always been able to count on Todd to have his fingers on the pulse of our business. Well prudently managing our balance sheet and optimizing our financials. Plus, he has been a real friend to the executive team members and myself.

Todd has agreed to hold off his retirement a bit until the end of the year as we transition to Dan Bailey to be a successor. I do also want to welcome Dan Bailey to TTM. On the heels of the successful sale of Aerojet Rocketdyne to L3Harris. Dan brings tremendous CFO experience and defense industry experience expertise to TTM.

As we map our strategic direction towards building our A&D business, from 47% of our revenues, where it stood at the end of Q2, to an over 50% contribution in the future. It was critical to us that we continue to build a management team with a strong understanding of defense industry dynamics. I am confident that with Dan joining our team, we will have added yet another strong, knowledgeable and ethical leader to our executive team.

With that, let's move on to the discussion of the quarter. I'll begin with a review of our business highlights from the quarter and a discussion of our second quarter results followed by a summary of our business strategy. Todd Schull will follow with an overview of our Q2 2023 financial performance and our Q3 2023 guidance. We will then open the call to your questions. The quarter's results are also shown on Slide four of the investor presentation posted on TTMs website.

In the second quarter of 2023 revenues were within guided range due to continued strength in the aerospace and defense end market, and better than expected results from our data center computing end market. These two markets offset lower than expected results from our medical, industrial and instrumentation and automotive end markets. Non-GAAP EPS was well above the guided range as a result of improved mix and operational execution, particularly in North America PCB operations.

Demand in our aerospace and defense market remains strong with continued record backlog offset by weaker demand in some of our commercial end markets. As we look into Q3, we see a mixed picture in our commercial markets. With sequential growth in our data center computing, and MI&I markets, stability in the automotive market and a continued decline in the networking market. Demand remains strong in our A&D market, which now represents 47% of our revenues.

I would now like to provide a strategic update. TTM is on a journey to transform our business to be less cyclical and more differentiated. Over the past several years. TTM has consistently emphasized that a key part of our strategy is to add value to the product solutions that we deliver to our customers, particularly in the aerospace and defense market. In 2018, we acquired Anaren, which broadened TTMs product portfolio into highly engineered RF components and sub-assemblies, as well as adding critical RF engineering capability and resources.

In 2022, we acquired Telephonics which builds on Anaren and TTMs customer driven culture and disciplined approach to engineering and manufacturing. The addition of Telephonics expands TTMs aerospace and defense product offering vertically into higher level engineered system solutions and horizontally into the surveillance and communications markets, while strengthening our position in radar systems. As a result of these strategic moves, over 50% of A&D revenues are from engineered and integrated electronic products, with PCBs being less than 50% of the overall contribution.

Since January, our A&D sector has been operating with two business units, radar, and C4Isr + Space. Our objective with this new organization has been to align our businesses with the critical program priorities of our customer base. I'm excited to see this new organization take shape as a critical piece of our strategy.

Another important element of our differentiation strategy is the current construction of a new state-of-the art highly automated PCB manufacturing facility in Penang, Malaysia. The decision to build this new factory as a direct response to our customers increasing concerns about supply chain resiliency, and regional diversification. And in particular, the need for advanced multi layer PCB sourcing options in locations outside of China. The new facility in Malaysia will assist customers in our commercial markets, such as networking, data center computing, and medical, industrial and instrumentation.

We continue to make progress on the Malaysian facility and construction is approximately 75% complete, tracking to target. We began to move in equipment in the second quarter, and will continue this effort through the third quarter. We remain on track for first production samples in the fourth quarter.

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TTM Technologies Inc. published this content on 02 August 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 August 2023 23:36:08 UTC.