TTM Technologies(US:TTMI)2021-10-27 23:19Financial Data and Key Metrics Changes - In Q3 2021, net sales were $556.8 million, up from $513.6 million in Q3 2020, driven by strong growth in automotive, data center computing, and medical industrial markets [45][46] - GAAP operating income was $30.2 million compared to a loss of $40.3 million in the same quarter last year, which included a goodwill impairment charge [47] - Non-GAAP net income was $36.5 million or $0.34 per diluted share, compared to $26.8 million or $0.25 per diluted share in Q3 2020 [55] Business Line Data and Key Metrics Changes - Aerospace and defense represented 31% of total sales in Q3 2021, down from 37% in Q3 2020, with a backlog of $723 million, up from $625 million a year ago [25][26] - Medical industrial instrumentation contributed 20% of total sales, exceeding $100 million in revenue, up from 19% in the previous year [29] - Automotive sales grew 57% year-over-year, representing 18% of total sales, consistent with Q2 2021 [31] Market Data and Key Metrics Changes - Networking communications accounted for 16% of revenue, down from 17% in Q3 2020, while data center computing represented 14% of total sales, up 29% year-over-year [33][35] - Capacity utilization in Asia Pacific was 91%, compared to 63% in the year-ago quarter, while North America's utilization was 50% [39] Company Strategy and Development Direction - The company aims to transform its business to be less cyclical and more differentiated, focusing on stable growth and improving margins [15] - TTM plans to add capabilities and products complementary to its current offerings through organic investments and acquisitions [17] - The company is actively managing supply constraints and higher raw material costs through supplier diversification and operational efficiency efforts [11] Management's Comments on Operating Environment and Future Outlook - Management noted that the labor situation is improving but remains a challenge, particularly in North America due to COVID-related issues [72][93] - The company expects continued elevated cost pressures in Q4, with revenue guidance of $530 million to $570 million [60][62] - Management remains optimistic about long-term growth, particularly in aerospace and defense, despite short-term challenges [120] Other Important Information - The company repurchased 2.1 million shares for a total of $28.9 million under its stock repurchase program [59] - Cash and cash equivalents at the end of Q3 2021 were $529.8 million, with a net debt to EBITDA ratio of 1.5 times [58] Q&A Session Summary Question: Sequential decline in gross margins - Management attributed the decline to production inefficiencies in North America and a revenue drop, with labor challenges being a significant factor [69][70] Question: Update on labor challenges - Management indicated that while labor conditions are improving, challenges remain, particularly in attracting and retaining staff [72][75] Question: Lead times and demand environment - Demand remains robust, with lead times extending to an average of 16 weeks in Asia and 4 weeks in North America [80][81] Question: M&A pipeline and buybacks - The company is actively pursuing M&A opportunities while balancing stock buybacks, with a focus on strategic needs and financial sense [83][88] Question: Backlog versus revenue guidance - Management explained the discrepancy between backlog and revenue guidance due to ongoing labor and material availability challenges [114][115]