TTM Technologies(TTMI) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - TTM Technologies achieved revenue of $730.6 million in Q2 2025, a 21% increase from $605.1 million in Q2 2024, driven by strong demand in various end markets [25][26] - Non-GAAP EPS reached a record $0.58, compared to $0.39 in the same quarter last year, reflecting strong operational performance [31] - Non-GAAP operating margins improved to 11.1%, up 210 basis points year on year, marking the fourth consecutive quarter of double-digit operating margin performance [6][29] Business Line Data and Key Metrics Changes - Aerospace and Defense segment accounted for 45% of total revenues, with net sales of $327.6 million, up from $274.5 million in Q2 2024 [26][17] - Data Center Computing segment represented 21% of total sales, achieving 20% year-on-year growth, driven by demand for generative AI applications [18][19] - Medical Industrial Instrumentation segment contributed 15% of total sales, with a 28% year-on-year growth due to increased demand in robotics and automated test equipment [18][19] Market Data and Key Metrics Changes - The automotive market saw a slight decline, contributing 11% of total sales, down from 14% in the previous year, primarily due to inventory adjustments [19] - Networking segment grew significantly, accounting for 8% of revenue with a 52% year-on-year increase, driven by demand from networking customers [20] - The company maintains a solid backlog in the Aerospace and Defense market, amounting to approximately $1.46 billion, indicating strong future revenue visibility [17][22] Company Strategy and Development Direction - TTM is focusing on expanding its manufacturing capabilities in the U.S. to support defense and generative AI markets, including a new facility in Eau Claire, Wisconsin [9][10] - The company is diversifying its production footprint and end markets, having divested lower-margin facilities in China and invested in new capabilities in the U.S. and Malaysia [7][8] - TTM plans to establish a second production site in Malaysia to meet increasing customer demand and supply chain diversification needs [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the defense market due to increased government spending, with a $150 billion increase in defense budgets expected to drive growth [11][12] - The geopolitical environment is being monitored, but TTM does not anticipate significant short-term impacts from tariffs due to its diversified operations [8] - Management remains optimistic about future growth, particularly in the aerospace and defense sectors, and expects continued strong demand in data center computing [5][6] Other Important Information - The company announced a change in its reportable segments to better reflect its operations, now categorizing into Aerospace and Defense, Commercial, and RF and Specialty Components [26] - TTM's cash flow from operations was 13.4% of revenues, with a net leverage ratio of 1.2 times, indicating a healthy financial position [6][32] - The CEO announced plans to retire, with a search for a successor already underway [24] Q&A Session Summary Question: Timeline for new capacity in Wisconsin and customer requests - Management indicated that the Eau Claire facility is prepared for customer engagement and infrastructure is ready for equipment installation as demand increases [39][40] Question: Concerns about slippage in Malaysia's breakeven timeline - Management stated that while the ramp-up in Penang is slower than anticipated, it does not impact competitive positioning, and customer interest remains strong [46][48] Question: Update on capacity expansion in China - Management confirmed that capacity in China is being expanded, particularly in Dongguan and Guangzhou, to meet data center demands [54][56] Question: Customer diversification in the data center segment - Management reported good diversification in the data center space, with ongoing efforts to balance capacity for core customers while adding new ones [58] Question: Cost competitiveness of the Eau Claire facility - Management acknowledged that initial costs in Eau Claire would be higher than in China, but there is customer appetite for U.S.-sourced capacity [84][85] Question: Margin drag in Penang - Management noted that the margin drag in Penang has worsened slightly, now at about 210 basis points [86]