TTM Technologies(TTMI) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Net sales for Q3 2024 were $616.5 million, up from$572.6 million in Q3 2023, driven by growth in data center computing and aerospace & defense markets [32] - GAAP operating income for Q3 2024 was $51 million, compared to a GAAP operating loss of$10.2 million in Q3 2023, which included a $44.1 million goodwill impairment charge [33] - Non-GAAP net income for Q3 2024 was$42.7 million, or $0.41 per diluted share, compared to$44.9 million, or $0.43 per diluted share, in Q3 2023 [39] - Adjusted EBITDA for Q3 2024 was$84.4 million, or 13.7% of net sales, compared to $84.1 million, or 14.7$65.1 million, representing 10.6% of net sales [40] Business Line Performance - Aerospace & defense accounted for 46% of total Q3 sales, with a book-to-bill ratio of 1.26 and a record program backlog of $1.49 billion [10][21] - Data center computing represented 19$25 million in Q3 and 106 million year-to-date, reflecting market turbulence [64] Strategic Initiatives and Industry Competition - The company is transforming its business to be less cyclical and more differentiated, particularly in the aerospace & defense market, where over 50% of revenue comes from engineered and integrated electronic products [11][12] - A new highly automated PCB manufacturing facility in Penang, Malaysia, is ramping up production, with revenues expected to gain momentum in Q4 2024 [13][14] - The company is consolidating its manufacturing footprint, closing three small PCB facilities and planning to consolidate two non-PCB facilities, reducing the total number of facilities to 22 worldwide [15][16] - A new advanced technology facility in Syracuse, New York, is under construction, focusing on high-technology PCB production for aerospace & defense, with initial low-rate production expected in 2026 [17][18] Management Commentary on Operating Environment and Future Outlook - Management highlighted strong operational execution, favorable revenue mix, and improved operating margins as key drivers of Q3 performance [8][36] - The company expects Q4 2024 net sales to be in the range of 610 million to $650 million, with non-GAAP earnings of$0.44 to 0.50 per diluted share [41] - The Penang facility is expected to reach break-even by mid-2025, with a current drag of 180 basis points on operating margins [49][53] - The Syracuse facility is expected to have minimal P&L impact in 2025, with significant ramp-up in 2026 [59] Other Important Information - The company reported a 17.8 million foreign exchange loss in Q3 2024, driven by unrealized translation effects on balance sheets in China and Malaysia [37] - Top five customers contributed 41% of total Q3 sales, with one customer accounting for over 10% of total sales [30] - The company plans to participate in several investor conferences in Q4 2024, including the Stifel Midwest One-on-One Conference and the UBS Global Industrials and Transportation Conference [44] Q&A Session Summary Question: Foreign Exchange Impact - The foreign exchange loss in Q3 2024 was unhedged and resulted from unrealized translation effects on balance sheets in China and Malaysia [46] Question: Penang Facility Execution - The Penang facility is currently a 180 basis point drag on operating margins, with break-even expected by mid-2025 [49][53] Question: Data Center Computing Market - 85% of data center computing revenue comes from hyperscale customers, primarily driven by Generative AI applications [56] - Visibility for Q4 and Q1 is solid, but forecasting beyond Q1 is challenging [58] Question: Syracuse Expansion - The Syracuse facility is expected to have minimal P&L impact in 2025, with significant ramp-up in 2026 [59] Question: Automotive Market Outlook - The automotive market remains weak, with program lifetime value wins of $25 million in Q3 and$106 million year-to-date [64] - The majority of past program wins are expected to go into production, but ramp schedules and production dates may be delayed [68] Question: Impact of Commercial Aerospace Strikes - Less than 2% of total company revenue is tied to commercial aerospace, with minimal impact from ongoing strikes [69] Question: Syracuse CapEx - The $100 million to$130 million CapEx range for the Syracuse expansion does not include federal and state contributions [71]