Q4 2019 Earnings Call
[music] good afternoon, ladies and gentlemen, thank you for standing by welcome to the TTM technologies fourth quarter 2019 financial results Conference call.
During today's presentation, all parties will be an they listen only mode. Following the presentation. The conference will open for questions.
To ask a question today, you will press star one on your telephone keypad.
As a reminder, this conference is being recorded today February 2020, some years decide TTM senior director of corporate development and Investor Relations will now review Tpms disclosure statement.
Thank you Brad 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 teach him future business outlook actual results could differ materially from these forward looking statement due to.
One or more risks and uncertainties, including the factors explains our most recent annual report on form 10-K, and other filings with the Securities and Exchange Commission. These forward looking statements are based on management's expectations and assumptions as to date of this presentation TTM does not undertake any obligation to publicly update.
Revise any of these dana's, whether it was out of your information future events or other circumstances, except as required by law.
Please refer to the disclosures regarding the risks that may affect TTM, but should we be filings and reports on form 10-K, 10-Q, 8-K [laughter]. The registration statement on form S. Four and the company's other FCC filings.
We will also discuss on this call certain non-GAAP financial measures such as adjusted EBITDA, such measures should not be considering that substitute for the matches prepared and presented in accordance with gap and we direct you direct you to that reconciliation of non gap to GAAP measures included in the company's press release, which was filed with the FCC and is available.
She has website at www dot TTM dot com well now turn the call over to Tom Edman teach yams Chief Executive Officer. Please go ahead Tom.
Thank you Samir.
Good afternoon, and thank you for joining us for our fourth quarter 2019 conference call.
I'll begin with a review of our business strategy, including highlights from the quarter.
Followed by a discussion of our fourth quarter results.
Slide show, our CFO will follow with an overview of our five of our Q4 2019 financial performance and our Q1 Twentytwenty guidance.
Well then open the call to your questions.
I am pleased to report, but in the fourth quarter 2019 T M generated revenues and dps above the guided range.
Strong year over year growth in aerospace and defense cellular and computing offset year over year declines in other commercial markets.
Addition, we recovered from the operational challenges in Q3 with solid execution in Q4 in both our aerospace and defense and commercial business driving strong margin improvement sequentially. Despite flattish revenues.
Finally financial discipline drove cash flow from operations to a strong $130.1 million in the quarter.
For the year cash flow from operations was $311.9 million compared to $273.1 million in 2018.
Despite declines in revenue and profit year over year.
Two weeks ago, we announced that we will be divesting our mobility business unit to AK M. need Bill a Chinese consortium for $660 million in cash.
This was a strategic decision, which allows us to focus on longer cycle markets and reduces our exposure to shorten product cycle and seasonal consumer markets, which historically have been brought prone to volatility.
In addition.
Only market growth has slowed but still requires substantial capital investment.
Making a challenging.
To do meet our desired business model.
We were pleased to find a buyer that had product synergies as well as capital resources to invest in the cellular marketing to support our customers and the 7500 employees associated with this business unit.
The transaction is expected to close towards the end of Q2 with proceeds to be received towards the end of Q3.
We plan to use the proceeds to reduce debt and invest in the company and will provide more details closer to close.
This transaction aligns with our strategic focus.
Diversification differentiation and discipline and we expected in the long term it will pay off for TTM, our investors and our customers.
We're also carefully monitoring the Corona virus situation in China, as we put the health of our employees first in our priorities.
Our facilities have delayed their post Chinese new year start up by an average of nine days with plans to restart operations on February 10th in line with government requirements.
We have implemented a regimen in our facilities to protect our employees from the spread of the disease through procedures, such as regular facilities sterilization mandatory masks in our facilities temperature checks for all incoming employees and visitors mandatory quarantine for employees returning from.
The impacted provinces and other measures.
We also have established a task force at the corporate level to coordinate communications with our customers regarding any impacts to production.
We have done our best to incorporate the potential impacts of the extended shutdowns and ongoing production in backs in our guidance for the first quarter.
In the meantime, we will remain focused on operational excellence and financial discipline as well as our strategic goals of diversification and differentiation.
In particular, we will continue on our path towards differentiation in the aerospace and defense and automotive end markets.
We continue to see strengthen the our aerospace and defense market.
Two significant areas of focus our missiles and munitions and radar systems, which are expected to lead our growth.
With a continued adoption of I use a radar technology across all armed services and the conversion of next generation gallium nitride or silicon germanium based platforms. The aisa radar market is expected to grow at an average add an 18% CAGR.
Lisa stands for active electronically scanned or Ray and represents the next generation technology for defense radars.
PGM as a leader in the design and manufacturing of RF sub systems and components for our.
Radar systems and is well positioned to benefit as defense programs upgrade from traditional mechanical radars to fixed solid state I used to radar.
This technology allows our customers greater performance in range accuracy, and sensitivity, which in turn increases detection and defense capabilities.
[noise] defense spending remains robust, which will provide a strong tailwind over the next few years, while near term strength is being driven by our strong program alignment with strategic defence programs, which number more than 80.
All right in the market book to Bill ratio at the end of the fourth quarter was 1.13.
Writing our N D program backlog to a new record level of $600 million.
Significant milestone for our aerospace and defense business and exceeding the $572 million in Q3 of 2019 and $481 million in Q4 2018.
Our aerospace and defense revenues grew 15% year over year in Q4, achieving a new record level.
We capitalized on positive market trends through our teams dual focus on supporting both customer build to print and design specification requirements across a broad base of major defense and commercial aerospace programs.
In addition, we announced the opening of a new Engineering center in being up in New York, and and advanced technology manufacturing facility in Chippewa Falls, Wisconsin.
Following the acquisition of manufacturing and intellectual property assets for my three electronics, we hired a number of engineering expertise previously employed by three to strengthen our technology capabilities and extend our patent portfolio for emerging applications for the aerospace and defense.
And high end commercial markets.
Moving onto our automotive business, we continue to develop positions and new programs related to the mega trends of vehicle safety and the tandem it's driving.
Hybrid and electric vehicles advanced infotainment and increased connectivity requirements, our goal will be to support our existing customers as they adapt to this new world. While also building business, where the set of new innovative technology focus to customers.
Because of the above macro trends there continues to be a tremendous amount of innovation in the automotive electronics industry.
In 2019 advanced technology revenue, which includes radar Lidar and H.T. I was 23% of revenue compared to 19% of our revenue in 2018.
Our design activity remains robust, which bodes well for future revenues.
In the automotive market customer engagement begins well before a product ramps.
In the quarter, we won 58, new automotive design with a lifetime program value of $70 million to $77 million of which 17, where Ada es related.
For the year, we captured a total of 248 design wins compared to 190 in 2018.
Designs that we are winning this year will contribute to revenues in future years.
Now I'd like to review our end markets.
Note that my comments will reflect the inclusion of the mobility business unit.
We plan to give pro forma end market expectations as we near the close the transaction.
For TTM, the aerospace and defense end market represented 26% total fourth quarter sales compared to 23% of Q4, 2018 sales and 24% of sales in Q3 2019.
We expect sales in Q1 from this end market to represent about 31% of our total sales.
For the full year aerospace and defense increased 15% and reached a record high as TTM benefited from increased defense spending and demand for multiple new programs. In 2020, we expect growth to continue to outpace market projections of 2% to 4% [noise].
[noise] the cellular phone end market accounted for 16% of revenue in the fourth quarter compared to 14% in Q4, 2018 and 19% in Q3 2019, we expect cellular do represent 10% of revenues in Q1 due to normal <unk>.
No declines.
For full year, 2019, cellular declined 13% and cellular customers manage inventory and reduced demand in a slowing smartphone market.
Due to better inventory management by our customers in 2019 as well as growth prospects from five Gee, we expect this market to grow in 2020 above longer term forecast of 2% to 5%.
Networking communications accounted for 15% of revenue during the fourth quarter of 2019.
This compares to 18 present in the fourth quarter 2018, and 13% of revenue in the third quarter of 2019.
Many of our networking and telecom customers declined year over year due to softness in service provider spending as well as impacts from the trade war between the United States in China, as we stopped shipments of U.S. made wireless components to walk away.
In Q1, we expect this segment to be 13% of revenue as these trends continue.
For the full year networking communications declined 13%.
Due to the anticipated soft start in the first half we expect this market to be below longer term forecasts of 3% to 5% growth in 2020.
Automotive sales represented 14% of total sales during the fourth quarter 2019, compared to 16% in a year ago quarter and 17% during the first third quarter of 2019.
Automotive sales declined year over year due to weakness from diesel products in Europe and sales levels in China.
The sequential decline was the result of Rtms business as the automotive PCB business was actually flat sequentially.
We expect automotive to contribute 13% of total sales in Q1 with PCB sales expected to be down sequentially. As a result of a delayed started up post Chinese new year.
For the full year automotive declined 16% and softer unit volumes in China, and Europe more than offset gains in PCB content.
2020, due to the anticipated soft start we expect the market to be below longer term forecasts of 5% to 8%, mostly as a result in significant declines in our Dms segment.
Sales in the computing storage peripherals end market represented 14% of total sales in the fourth quarter compared to 13% in Q4 of 2018 and 12% in the third quarter 2019.
We saw strength in our semiconductor and datacenter customers, partially offset by declines in high end notebook sales.
The laptop and tablet revenues were approximately 30% of computing revenues in Q4 and will be included in the pending mobility business unit divestiture.
We expect revenues in this end market to represent approximately 15% of first quarter sales.
For the full year computing declined 10% as we saw declines across our data center server customers.
2020, we expect to be above the expected end market growth of 1% to 3% due primarily to a recovery in our semiconductor and datacenter customers.
The medical industrial instrumentation end market contributed 13% of our total sales in the fourth quarter compared to 14% in a year ago quarter, and 13% and the third quarter of 2019.
We saw strengthen our instrumentation customers there was offset by weakness in our industrial customers due to declines in global industrial demand.
For the first quarter, we expect this market to be 16% of revenue [noise].
[noise] for the full year M.I. Eni declined 6% due to weakness from our industrial customers from reduced manufacturing and activities and impacts from trade wars.
2020, we expect growth to be in line with the 3% to 5% forecast with year on year momentum driven by our large instrumentation customers and business development activities with new customers.
Next I'll cover some details from the fourth quarter.
During the quarter.
Our advanced technology business, which includes H.T.I. rigid flex substrate and RF sub systems and components accounted for approximately 42% of our company's revenue.
This compares to approximately 38% in the year ago quarter and 41% in Q3.
The sequential and year over year increases were due to a combined growth in our cellular and computing end markets.
We are continuing to pursue new business opportunities and increased customer design engagement activities that will leverage our advanced technology capabilities in new markets.
Capacity utilization in Asia Pacific was 72% in Q4 compared to 73% in the year ago quarter and 71% in Q3.
Our overall capacity utilization in North America was 57% in Q4 compared to 57% in both a year ago quarter and Q3.
Our top five customers contributed 37% of total sales in the fourth quarter of 2019 compared to 35% in the year ago quarter and 38% in the third quarter of 2019.
Largest customer accounted for 18% of sales in the fourth quarter versus 17% in the year ago quarter and 20% in Q3.
At the end of Q4 are 90 day backlog, which is subject to cancellations was $511.2 million compared to $463.4 billion at the end of the fourth quarter last year and $529.3 million at the end of Q3 are.
PCB book to Bill ratio was 1.05 for the three months ending December Thirtyth.
I'd like to conclude by emphasizing tpms commitment to operational discipline and strategic focus [noise].
Well, we had a challenging year in terms of revenue declines in our commercial end markets, we managed our business well by adjusting our cost structure maximizing our cash flow and executing a strong fourth quarter.
In addition, we made progress on our strategic goals of diversification differentiation and discipline through the acquisition of the asset survive three initial revenue synergies from the N. or an acquisition and the divestiture of the mobility business unit.
While we are facing short term challenges from the Corona virus longer term, we expected benefit from secular trends such as Fiveg wireless technology, increasing automotive electronics content and increasing use of RF electronics in the aerospace and defense industry.
Now Todd will review, our financial performance for the fourth quarter Todd.
It's gone and good afternoon, everyone.
Are you going here I've got a bit of a cold. So if you hear my voice fading in and out please bear with me.
For the fourth quarter net sales were $719.3 million compared to net sales of 700 and $711 million in the fourth quarter of 2018 and compared to third quarter 2019, net sales were $716.8 million.
The year over year increase in revenue was due to growth in our aerospace and defense cellular and computing end markets, partially offset by declines that are networking and communications automotive and medical industrial instrumentation and markets.
GAAP operating income for the fourth quarter of 2019 was $49.4 million compared to $42.8 billion into fourth quarter of 2018 and $36.4 million in the third quarter of 29 team.
On a GAAP basis net income in the fourth quarter of 29 team was $25.3 million or 21 cents per diluted share.
This compares to net income of $52.5 million or 42 cents per diluted share in the fourth quarter of last year and $15.9 million or 14 cents per diluted share in the third quarter of 2019.
The fourth quarter of 2018 results reflect the release of a tax valuation allowance of $43.6 million.
The remainder of my comments will focus on our non-GAAP financial performance.
Non-GAAP performance excludes acquisition related costs restructuring costs, certain non cash expense items and other unusual or infrequent items.
We present non-GAAP financial information to enable investors to see the company through the eyes that management and to provide better insight into the company's ongoing financial performance.
[noise] gross margin in the fourth quarter was 17.6% compared to 17.5% in the fourth quarter of 2018 and 14.8% in the third quarter of 2019.
The year over year improvement in gross margins was due primarily to the changes in revenue noted earlier.
Selling and marketing expense was $18.3 million into fourth quarter or 2.5% of net sales.
Versus $18 million or 2.5% of net sales a year ago, and $17.8 million or 2.5% of net sales in the third quarter.
Fourth quarter, Gionee expense was $36.2 million or 5% of that sales compared to $33.1 million or 4.7% of net sales in the same quarter, a year ago and $34.2 million were 4.8% of net sales in the previous quarter.
Operating margin in Q4 was 10.1%.
This compares to 10.3% in the same quarter last year and 7.5% in the third quarter of 2019.
Interest expense was $16.6 million in the fourth quarter, a decrease of $1.5 million from the same quarter last year due to lower interest rates and debt repayments.
During the quarter, we recorded $4.3 million of foreign exchange losses.
The government incentives reduce the laws to $3.1 million or approximately three cents of vps.
This compares to a gain of $2.3 million or approximately two cents vps in Q4 last year.
And $7.9 billion or approximately seven cents in the third quarter of 2019.
Our effective tax rate was 16.6% in the fourth quarter.
Fourth quarter net income was $43.9 million or 41 cents per diluted share.
This compares to fourth quarter 2018, net income of $55 million or 52 cents per diluted share and third quarter 2019, net income of $38.9 million or 37 cents per diluted share.
Adjusted EBITDA for the fourth quarter was $111.3 million or 15.5% of net sales.
Compared with fourth quarter 2018, adjusted EBITDA of $117.4 million for 16.5% of the sales.
In the third quarter, adjusted EBITDA was $103.5 billion or 14.4% about sale.
[noise] cash flow from operations was $130.1 million in the fourth quarter versus $151.8 million in the same quarter last year.
For all of 29 team cash flow from operations was $311.9 million.
Versus $273.1 million in 2018.
Cash and cash equivalents increased at the end of the fourth quarter to $400.2 million from $360.7 million.
In the third quarter as we accumulate cash for the repayment of our convertible bond that matures in December of 2020.
[laughter] excuse me.
Active at the end of Q4.
Our convertible bond has now classified as short term debt on our balance sheet.
[noise] appreciation for the fourth quarter was $42 million net capital spending for the quarter was $47.3 million.
Now I'd like to turn to guidance for the first quarter.
As Tom mentioned earlier.
The Kuroda virus outbreak is affecting our operations in the PRC.
As part of the government's approach to control the virus.
The Chinese new year holiday has been extended to February 10 about nine days longer than expected.
Given the reduced number of production days.
We expect total revenue for the first quarter 2020 to be in the range of 580 million to $620 million.
We expect non-GAAP earnings to be in the range of five cents to 11 cents per diluted share.
Which reflects nine cents of negative EPS impact from the additional nine days of shutdown.
If the Corona virus outbreak causes the government to extend the factory shutdown beyond February to.
Our financial results would be negatively impacted even further.
Bps forecast is based on a diluted share count of approximately a 108.5 million shares.
Our share count guidance includes dilutive securities such as options than ours, Hughes and 1.3 million shares associated with our convertible bonds, which is a function of our future stock price.
As a reminder, for every dollar increase and the average stock price above $14 in 26 cents during the quarter our shares outstanding would increase by approximately 1.5 million shares [noise].
[noise] expected SGN expense will be about 8.9% for revenue in the first quarter, we expect interest expense to total about $17.2 million.
Finally, we estimate our effective tax rate to be between 13 and 17%.
To assist you in developing your financial models, we offer the following additional information.
We expect to record during the first quarter amortization of intangibles of about $11.6 million.
Stock based compensation expense of about $3.8 million noncash interest expense of about $3.6 million and we estimate depreciation expense will be approximately $42 million.
We plan to provide pro forma financials, excluding the mobility business as we near the close of the transaction.
So this concludes our prepared remarks, and now I'd like to open the lines for questions Brad.
Thank you.
I'd like to ask a question. Please signaled by pressing star one on your telephone keypad.
If you are using a speaker phone. Please make sure. Your mute function has turned off to allow your signal to reach our equipment and again press star one to ask a question well pause for just a moment to allow everyone and opportunity to signal for questions.
Well take our first question from Matt Sheerin what cycle.
Yes. Thank you and good afternoon, just first question regarding the extended shutdown in your China facilities regarding the other Corona virus.
How should we think about another extension lets say another week or so is it sort of in that you know nine cents for every 10 day type of or Youre more or less I'm from that and then and if indeed.
The workers come back at the scheduled time I'm would you expect any distractions, maybe less people coming back which could hinder production ramps as you get back to work.
Matt those are really good questions. So let me answer the second one first in terms of Ah you know a say a trickling effect of employees coming back we know there's going to be some quarantine requirements. We have tried to comprehend to that in our.
Guidance that was provided so that's part of that nine cents of a bad news that were attributed to the Kuroda virus.
To your second point, what if it gets extended it won't be the same magnitude because we we've kind of just lose the trickle in effect a little farther down the road if you will.
I won't be quite the same magnitude.
[music].
Roughly half of that I would suggest is probably the impact if we continue to decline we get a time.
The best we can see at this point.
Actually a very fluid situation.
And we're getting uptake almost daily that only from the government in terms of what's going on but also from our own internal folks as we communicate with our workers.
Yeah, and I guess, the other issues that other parts of the supply chain are also under constraint and if they don't come back you know I places to ship and I'm sure you're talking to customers I guess, the the last follow up to that is whether or not you wouldn't see you know these orders just get pushed out and you would make some of that up in in Q2 yeah.
So so yes, thank you Matt.
A few things going on there do aspects of that question, yes, absolutely.
We're where we are remaining close to our vendors as well most of whom have China, China based facilities.
Sure and were coordinating with them.
To to try to mitigate impacts, but obviously.
That is that as a major factor here.
And ER and in terms of of the customers in coordination with the customers.
You're right as you know as we as we come out of this.
We're gonna be making sure that we do our best to meet customer requirements and prioritize and we're working with them very to prioritize their production needs and there's also a piece of this that that we can manufacture and in our facilities in North America or in and Hong Kong.
So we're also trying to certainly support Q D.A. requirements out of those facilities. So yeah, I mean that it it is.
Because as you know, it's a logistics exercise right now to try to plan for coming out of new year, Chinese new year, and do our best to than me.
Customer needs.
Yeah, Yeah, you're not going to see these aren't borders that are going away. These are orders that.
We're going to do our best of service side of the either as we come out of Chinese new year, our out of our existing facilities and.
And at the end of the day it may or May result in delays.
Certain aspects of production.
Understood. Okay. That's it for me thank you.
Thank you. Thank you.
We'll take our next question from Steven Fox with Ross Research.
Thanks, Good afternoon I'm sorry, another question on you factor Corona virus.
What you're talking about from a financial impact doesn't contemplate any impact if your customers may be down for longer or.
Different types of supply chain issues. This is just the direct impact that you see on your plan at this point right.
That's correct.
Okay and then when you when you think about sort of the supply chain. You have you gotten any indications are you seeing any kind of activity that would maybe even suggests customers would be anxious to Poland orders as much as they can given that maybe supply chains to be disrupted for longer periods of time.
Yeah.
So best best way the to respond to Steve. It you know right now the so number one.
I have to be eye, but our customers are really working with us and understanding of the situation.
As you know, they're dealing with an industry and printed circuit boards were 70% approximately aboard production is in China.
They recognize the challenges there.
And so there are there is movement in terms of how they prioritize products or not and and so sure that can be Poland's in certain places. It also can be pushouts and products as they are de prioritizing. So right now it's sort of goes goes both ways I'm insurance provider, our dialogue and of course all of this.
It is planning at this point, because we won't be Bakken production.
All goes according to plan at this point won't be back into production until early next week. So.
So that's the kind of coordination that's occurring right now.
Got it appreciate the color and then that's switching gears here and market. She mentioned that you're seeing a you've mentioned the better.
Demand or recovery in semi cap and datacenter demand can you sort of talk about what.
That seems like what kind of slope of recovery or are you factoring in and then I had one of the thank you.
Yeah.
Thank you I think I think if you if you look at.
Semiconductor so semi semiconductor capital equipment requirements, which really fall into our am I.
Yeah, we've we've seen a pretty pretty steep acceleration in terms of requirements there.
And as you know that's a that's a business that.
You know what it p. it moves up very rapidly I think you're you're gonna see I'm at some sustained requirement strong requirement there for the next several.
Quarters hard to sort of look beyond that.
Towards the end of the year.
But but a very I think a positive certainly a positive upward trend that we've seen starting early Q4, and and really moving through what we're seeing in Q1.
Data center side.
We saw ramp you know ramps.
Restart again in our Q4 and and certainly look to be strong again at least through the first half of this year and then we'll see how visibility develops beyond that but yeah. We've been pleased to see that you know that period up at I'd gestation.
Data center side.
At this point seems to be our customers have moved through that they're now ramping on new programs. Those ramps typically will be you know two quarters, two to three quarter kind of ramped and a and their staggered a bit of depending on the customer. So good good to see that kind of momentum right now and the datacenter side.
Got it that's interesting and then just starting last point you've had some excellent growth in aerospace defense. You know last couple of years you highlighted why you can continue but you know can you sort of add around the edges. Why you know that growth maybe doesn't slow down after the last.
Couple of years like what would be the one or two most salient points to the fact that sure.
Going on Yep Yep sure Yeah. So I think that you know the two two real factors as far as TTM as is concerned one as we are seeing requirements.
And you know broad technology requirements.
In aerospace and defense and they're sort of reflective of what you see on the commercial side of the business around Fiveg.
But increase to requirements in terms of the lines in spacing for four boards in terms of RF.
Related requirements, and those and those requirements being pretty broad in terms of of.
Programs, requiring advanced technology, so so that gives us a.
Strong feeling of confidence in this market and then over and above that we have you know really radar growth that's going to drive the I use a radar installations and that will that wave of demand should continue for you know a good good long time because of the fixed radar instead.
Relations that are out there that need to be upgraded or replace.
So you're looking at I, you know multi year requirement there for four radar and add radar technology shifts.
So you know our our determination in this market is to continue to engage and move.
Forward in terms in that engagement.
Certainly and RF is a first priority, but more broadly as we bring in our advanced technology capabilities out of the new Chippewa falls facility to be able to supplement what we're doing an RF with what we're doing more broadly in printed circuit board technology to improve our upfront engagement.
With those customers. So I think we've got the right strategy in place and certainly the market momentum continues to be there for Tcf.
Got it that's helpful. Thank you very much.
Thank you.
Thank you. Our next question comes from Mike Crawford with B. Riley FBR.
[laughter] things continuing on the aerospace and defense theme well, we did like Raytheon's 1.5 book to Bill in the fourth quarter, but.
Are there any particular new programs, you're looking to get funded one we see the new school 21 Deo de budget request later this month.
[laughter].
There so.
I'll just answer it broadly I think any any program that involves that involves extensive a radar replacement those are programs that were.
Keenly interested in we'll certainly highlight major program wins last the last quarter, we highlighted l. dams.
Which really is the Patriot missile upgrade.
And that that program when that's a that was a really good one in terms of TTM content and so if you're looking at you know as we look at programs. We look at spending plans. We're encouraged by a couple of things I think you know I talked about the radar. We're also encouraged by the attention too.
Space and space requirements.
And that's going to me again push the boundaries of technology.
And and when you're looking at pushing winds down spacing pushing reliability requirements. Those those are opportunities for us.
And so as you those that's the other sort of category of programs that I would keep my eyes on and and definitely encouraging to see a real emphasis out there on.
On the technologies that are required going forward. So.
Very very positive climate for us in there on the aerospace and defense side.
Okay, Great can we had hypersonics to that as well as was space you can absolutely hypersonics fit right into it right into that category and and as you can imagine hypersonics, you're going to be looking at.
Lines in spacing again sub sub 100 micron towards you know heading into the 50 micron type lines and spacing if not the low in order to accommodate some of the chipsets that are being developed so.
So yeah, yeah, that's a that's a real positive.
Okay, Great and then just one other question on the automotive vertical view, obviously, you're growing the advanced technology piece, which is a I think 23% in the latest quarter. When do you think that's starting point worth that becomes [laughter] over 50%.
So so actually it's 23% in the last year.
That was a full year full year number and that was and that was up from 19%. We try to update update that every year. The previous year. It was about 13%. So we went from 13% of 19% to 23%.
I don't I don't think were frankly, I don't think we're gonna get a 50% I think it's entirely possible we could move up towards you know somewhere between 30 and 40%.
The reason for that is that he these are still gonna demand.
Substantial they're gonna be substantial requirements for heavy copper standard heavy copper treaty conventional printed circuit boards those are still very difficult to build because of the voltages that you're running through those boards.
So these are very complex conventional boards, but they are and the conventional category.
And then of course with either you're going to have the additional requirements for sensors the additional requirements for infotainment.
But you're still going to have that that base need for conventional boards and I don't see that changing as we go forward. So conventional board should continue you know as we again as as Sars starts to come back we should start to see growth come back on the conventional side.
And then what you'll see is a higher growth component to the advanced technologies.
Okay, great. Thank you.
Thank you. Thank you once again, if you'd like to ask your question. Please press star one at this time well take our next question from Mike success with Needham and company.
Hey, guys. This is Mike CECO sounds from Needham <unk>.
We order and market I'm interested to kind of walk us through I understand the the challenges that that market soon on the minutes from you guys need to win co ruins, the especially on either side.
How is that holds ones that weren't good currently just from from a new kogan respective putting aside the me I'm just interested in how.
The ebb and flows that marketers.
And Mike specifically to the automotive market correct.
Yes.
Yes.
So.
I would say that that and as we highlighted and and as you can see and and the trends where we're still the numbers the wins a there were gaining in terms of Oh, the new technology area, particularly in the Ada Es.
Our are continuing but you know to maintain strong momentum so rusty it's still seeing.
Very good innovation there.
And I would expect that to continue we're still seeing a lot of activity frankly on out of China as well as what we see out of the U.S. So even with the industry. You know struggling I think there's a there's a strong acceptance that Ah that these are these the yeah.
Basin is critical to the future and that that is an area of emphasis and continued commitment from customers.
So.
I don't see of a major change in the pace in terms of our design wins and also the innovation.
Thats occurring.
On our customer side and I think the you know that we try to show that with the data. If you you know if you would think about 58 automotive design wins that is up from the previous year I'd expect that trend will continue.
As we go forward.
That's helpful. And then if you could also there's still a little deeper into.
You are compute and storage peripheral and more good as well as the medical industrial end markets I'm just interested in.
I guess, how helps them were played out versus your expectations.
As we look as we look out.
Through the course of 2020.
Specifically I work I was working out of the do it got expectation for before.
Okay sure.
So if you look at a at computing, we actually really did well and computing you know based against our forecast in Q4, Oh, we saw that that data center.
Strong growth, where we actually saw semiconductor.
Activity pick up as well and ER and both areas and particularly I'd I'd highlight so while datacenter was a good a nice steady build.
And what we saw in the semiconductor side was a much more rapid and urgent requirement as we as we sort of progressed through the through the quarter. So I'm really really strong developments, there and over what we forecast.
So that was that was great on the EMI Isight actually we ended up pretty much on.
Where we had forecasted for am I.
I would I like just the inside of that we saw more weakness than we expected in industrial and that was then what we saw the instrumentation side was more strength than we expected.
So I highlighted earlier, the you know semiconductor capital equipment requirements.
Very strong and stronger than that had been forecast as we came into the quarter and then that was balanced by industrial being being weaker than we had expected in the quarter.
So so that's where the movement was medical continued to to tag along pretty well.
Okay, I'm just building on that.
So the computing I know that you said the data center. The none was relatively steady where's. The semi was was more rapid more urgent a is that the others are a reflection of those different end markets on how they typically lose or was this new this for is that more rapid and more urgent summit kinda medicines, Oh, no I would.
Put that to add that's not that's not untypical and and you know what the datacenter demand it it's.
And so we had forecast growth there we saw stronger growth in data center.
Then we had expected.
It was and so what I meant by steady or the steady ramp than we saw through through the quarter on data center, yeah that the on the semiconductor side not unusual it most of most of our board requirements are going to test and burn in requirements in semiconductor and so there.
Were tied to innovation and if and if our customers have a drive you know if there if there's a program drive for for a new platform or new capability. That's went that's when we see these spikes and so you could that can be subject to pull ins that can be subject.
The man, that's that's higher than we forecast so not unusual to see you know changes that are little bit outside of our forecast.
Okay, great. Thank you.
Thank you.
Thank you.
We have no further questions at this time I would now like to turn the conference back to Mr., Tom Edman for closing remarks.
Sure thing I'll, just close by summarizing some of the points. We made earlier first we delivered earnings above the guided range, we generated strong cash flow.
We recovered from operational challenges last quarter second we announced the divestiture of the mobility business units unit, which will reduce the volatility we have as.
Historically seen in our business performance.
And it's also fits well with our core strategies of diversification differentiation and discipline and finally I'd like to thank our employees customers and investors.
Were there and your continued support.
As we navigate the challenge is to our businesses.
And I, particularly.
What all of us and to begin to think about and certainly we do a lot of thinking about the wellbeing of our employees.
As they deal with a challenge with the Crown the virus in Hong Kong and in China.
And I know you share share the a the feeling the same feelings and.
Certainly our thoughts or would those employees.
And and we all are looking for the impact here to be short term in nature.
As we continue at T M to focus on our on the longer term strategic.
Focus areas of diversification differentiation disciplined thank you for joining the call Goodbye.
Ladies and gentlemen, this concludes today's call. We thank you for your participation you may now disconnect.
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