Q1 2025 TTM Technologies Inc Earnings Call
[music].
Good afternoon, Thank you for standing by.
Speaker Change: Come to the TTM Technologies, Inc. First quarter 2025 financial results conference call. During today's presentation, all parties will be in a listen only mode.
Speaker Change: Following the presentation the conference will be open for questions.
Speaker Change: I ask a question during the session you will need to press star one on your telephone you will then hear an automated message advising your hand is right.
John Your question Press Star one again.
Speaker Change: As a reminder, this conference is being recorded today April 32025, Sameer Desai Ttm's, Vice President of corporate development and Investor Relations will now review Ttm's disclosure statement.
Speaker Change: Mr does that.
Speaker Change: Thank you Sherry before we get started I would like to remind everyone that today's call contains forward looking statements, 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 include.
Speaker Change: The risk factors, we provide in our filings with the Securities and Exchange Commission, which we encourage you to review. These forward looking statements represent managements expectations and assumptions based on currently available information TTM does not undertake any obligation to publicly update or revise any of these.
Speaker Change: Forward looking statements, whether as a result of new information future events or other circumstances, except as required by law.
Speaker Change: We'll also discuss on this call certain non-GAAP financial measures such as adjusted EBITDA such measures should not be considered as a substitute for the measures prepared and presented in accordance with GAAP and we direct you to the reconciliation between GAAP and non-GAAP measures included in the company's earnings release, which.
Speaker Change: Is available on the Investor Relations section of Ttm's website at investors <unk> G T M Dot com.
Speaker Change: We have also posted on that website, a slide deck that we will refer to during our call.
Speaker Change: I will now turn the call over to Tom Edman, Ttm's Chief Executive Officer. Please go ahead Tom.
Speaker Change: Thank you Samir good afternoon, and thank you for joining us for our first quarter 2025 conference call.
Speaker Change: I'll begin with a review of our business highlights from the quarter and a discussion of our first quarter results followed by a summary of the current geopolitical environment and impact to TTM.
Speaker Change: Dan Bailey, our CFO will follow with an overview of our Q1 2025 financial performance and our Q2 2025 guidance. We will then open the call to your questions.
Speaker Change: Highlights of the quarter's financial results are summarized on slide three of the earnings presentation posted on Ttm's website.
Speaker Change: We delivered a strong first quarter of 2025, and I would like to thank our employees for their hard work and contributions and supported these results.
Speaker Change: In the first quarter of 2025, PCM achieved revenue and non-GAAP EPS above the high end of the guided range.
Speaker Change: Revenue grew 14% year on year, representing better than seasonal trends due to demand strength from our aerospace and defense data center computing networking and medical industrial and instrumentation end markets, partially offset by a slight decline in the automotive end market.
Speaker Change: Overall, the company book to Bill ratio was 110.
Speaker Change: Demand in our aerospace and defense market, which was 47% of revenues for the quarter remained strong and we continue to have a solid program backlog of approximately 155 billion.
Speaker Change: Finally, the company's non-GAAP operating margins of 10, 5% were up 340 basis points year on year as we recorded the third consecutive quarter of double digit operating margin performance, reflecting continued solid execution.
non-GAAP operating margin and non-GAAP EPS were at a record high for our first quarter and performed much better than normal seasonal trends.
Speaker Change: The strong first quarter results demonstrated the company's strategy of reducing seasonality and operating performance.
Speaker Change: Let me now turn to the new policy is being implemented by the current administration and the potential impact of TTM and how we are positioned to withstand the challenges we might face this year.
Speaker Change: We have significantly reshaped the company over the last 10 years through diversification of end markets as well as our manufacturing footprint divesting consumer and lower margin facilities in China and investing in new production capabilities in other regions such as Malaysia.
Speaker Change: We currently have no direct consumer exposure and the aerospace and defense market is close to 50% of revenues.
Speaker Change: When thinking about tariffs, we categorize the potential impact in three ways direct impact to revenue direct impact on materials and equipment and indirect impacts such as overall end demand weakness and economic slowdown.
First we do not expect significant direct impact to revenue is only 3% to 4% of our revenues represent direct imports from China into the U S by our customers.
Speaker Change: This revenue the customer is responsible for paying the tariffs and in most cases, they can find alternative contract manufacturers outside of the U S to do their necessary Assembly work.
Speaker Change: We also are working with these customers to offer alternative TTM PCB manufacturing locations to help mitigate the impact if that is their preference.
Speaker Change: So far we have not seen significant changes in customer behavior.
Speaker Change: In terms of our raw materials and equipment.
Speaker Change: <unk> is responsible for paying tariffs on imports into the U S and although we generally sorts within country or region, we do have some greater exposure here.
Speaker Change: We import very little from China into the U S and from the U S into China, but we or our vendors imported materials worth approximately 11% of revenues into the U S from Europe and the rest of Asia.
Speaker Change: In regards to equipment, approximately 23% of our global capital spending in 2024 was equipment imported into the U S from Europe, and Asia with very little from China.
Speaker Change: In 2025, we expect equipment imported into the U S from Europe, and Asia to be approximately 29% of our global capital spending due to equipment purchases for our new manufacturing facility in Syracuse.
Speaker Change: In addition, very little equipment from the U S has exported into our facilities in China.
Speaker Change: Our goal is to mitigate the impact of tariffs on materials and equipment purchases through delivery timing sourcing location and the adjustment of pricing models.
Speaker Change: We are also engaged with the government in regards to the portion of our equipment investment, which is tied to department of defense related funding.
Speaker Change: So as a reminder, the minor direct impact of tariffs as a result of our diverse manufacturing footprint with a presence in North America, China, and Malaysia, and we plan to employ mitigation strategies to minimize its effects.
Speaker Change: Finally, the indirect impact I E and market potential demand weakness due to higher prices in specific markets or an overall economic slowdown is more difficult for us to predict.
Speaker Change: To date, we have not seen a significant shift in customer behavior due to tariffs.
Speaker Change: But we will continue to monitor this closely.
Speaker Change: Every year, we modeled downside and upside scenarios through our budget and the key is to be vigilant flexible and poised to adjust to a potentially dynamic demand environment.
Speaker Change: An encouraging indicator is the number of announcements coming from companies in our commercial markets regarding planned investments and more manufacturing in the United States, which could be a positive for TTM longer term due to our strong U S footprint.
Speaker Change: Of note is the Star Gate project to bring the supply chain of generative AI to the U S.
Speaker Change: In addition, Nvidia Apple and meta have all made public announcements regarding their plans to invest in the U S.
That brings me to another focus of this administration, which is the department of government efficiency or does and its impact to our business.
Speaker Change: The initial impact of <unk>, which has been largely felt outside of the department of defense.
Speaker Change: Within the Dod.
Speaker Change: Focus has been on consulting contracts, rather than the reductions and defense programs.
Speaker Change: In regards to the defense budget fiscal year 'twenty five has started with a continuing resolution as Congress works to develop a reconciliation package.
Speaker Change: Discussions to date show a continued increase in defense spending in the $150 billion range.
Speaker Change: In addition, the president has indicated that the 2026 budget request will be in a trillion dollars range, indicating further increases in defense spending.
Speaker Change: There have also been actions from the government to support the domestic defense industry, particularly around missile defense.
Speaker Change: The missile Defense Agency currently Hasnt resi out for the Golden Dome for America project seeking information and market analysis concerning the strengthening of the country's missile defense system.
Speaker Change: Note that roughly half of Ttm's aerospace and defense business is tied to radar systems, which would benefit from more missile defense spending.
Speaker Change: Outside the U S. Various NATO countries are looking to increase defense spending, which would potentially benefit U S defense contractors in the near term.
Speaker Change: Next I will provide an update of our new facilities in Penang in Syracuse.
Speaker Change: We continue to make progress with customer qualifications in Penang with increasing revenues in the first quarter and a book to bill well above one we.
Speaker Change: We expect the revenue ramp to accelerate and reached breakeven levels towards the end of the third quarter.
Speaker Change: In terms of the new facility in Syracuse external construction is largely complete and we continue to make progress on the internal fabrication.
Speaker Change: We have placed orders for equipment and pending uninterrupted delivery expect installation to begin in the summer with production slated for the middle of 2026.
Speaker Change: Lastly, I would like to highlight that we published our second corporate sustainability report or CSR on April 22nd.
Speaker Change: Earth day, which reflects our clear commitment to minimize the impact of our facilities on the environment.
Speaker Change: Now I'd like to review, our end markets, which I referenced on page four of the earnings presentation on our website.
Speaker Change: The aerospace and defense end market represented 47% of total first quarter sales compared to 46% of Q1, 2024 sales and 47% of sales in Q4 of 2024.
Revenues grew 15% year on year.
Speaker Change: Solid demand in the defense market as a result of a positive tailwind in defense budgets are strong strategic program alignment and key bookings for ongoing franchise programs.
Speaker Change: We maintained a solid A&D program backlog of approximately 155 billion at the end of the first quarter compared to 138 billion in the year ago quarter.
Speaker Change: During the quarter, we saw significant bookings for the javelin and <unk> related programs.
We expect sales in Q2 from this end market to represent about 45% of total sales bookings.
Bookings in the aerospace and defense market ship over a longer period of time than in our commercial markets and provide good visibility into the future revenue growth.
Speaker Change: Sales in the data center computing end market represented 21% of total sales in the first quarter compared to 21% in Q1 of 2024 and 22% in the fourth quarter of 2024.
Speaker Change: This end market saw a 15% year on year growth, which was better than expected due to continued strength from our datacenter customers building products for generative AI applications.
Speaker Change: We expect sequential growth in revenues in this end market to represent 21% of second quarter sales.
Speaker Change: The medical industrial instrumentation end market contributed 13% of our total sales in the first quarter compared to 14% in the year ago quarter and 13% in the fourth quarter of 2024.
Speaker Change: This end market saw a return to year on year growth of 5% as inventories have normalized in the industrial area and we saw increased demand from our semiconductor testing customers as generative AI drove increased purchases of automated test equipment.
Speaker Change: For the second quarter, we expect the medical industrial instrumentation end market to be 15% of revenues.
Speaker Change: Automotive sales represented 11% of total sales during the first quarter of 2025% compared to 13% in the year ago quarter and 11% during the fourth quarter of 2020 for the.
Speaker Change: The year over year decline for automotive was due primarily to continued inventory adjustments and soft demand at several customers.
Speaker Change: We expect our automotive business to contribute 11% of total sales in Q2.
Speaker Change: Networking accounted for 8% of revenue during the first quarter of 2025. This compares to 6% of revenue in the year ago quarter and 7% during the fourth quarter of 2024.
Speaker Change: Year on year growth was 53% the strongest in many quarters due to increased switch related demand from certain networking customers.
Speaker Change: In Q2, we expect this end market to be 8% of revenues as this market continues to show strong growth driven by AI related demand and new products.
Speaker Change: Next I'll cover some details from the first quarter.
Speaker Change: This information is also available on page five of our earnings presentation.
Speaker Change: During the quarter, our advanced technology, and engineered products, which include HCI rigid flex RF subsystems and components and engineered systems accounted for approximately 44% of our revenue. This.
Speaker Change: This compares to approximately 48% in the year ago quarter and 50% in Q4.
Speaker Change: We are continuing to pursue new business opportunities and increase customer design engagement activities that will leverage our advanced technology, and engineered products capabilities and new programs and new markets.
Speaker Change: PCB capacity utilization in Asia Pacific was 58% in Q1 compared to 52% in the year ago quarter and 59% in Q4.
Speaker Change: On a year on year basis utilization rates improved as data center demand continues to be strong and the networking market rebounded.
Speaker Change: Our overall PCB capacity utilization in North America was 35% in Q1 compared to 38% in the year ago quarter and 34% in Q4 as a reminder, North America utilization figures are not as meaningful as Asia Pacific because bottlenecks in these high mix low vol.
Speaker Change: <unk> facilities tend to occur in areas outside of <unk>, which is the core process that we use for calculating utilization rates.
Speaker Change: Our top five customers contributed 45% of total sales in the first quarter of 2025% compared to 42% in the first quarter of 2024, we.
Speaker Change: We had one customer with over 10% of our total sales in the quarter.
Speaker Change: At the end of Q1, our 90 day backlog, which is subject to cancellations was $517 5 million.
Speaker Change: Compared to $459 $5 million in the first quarter of last year.
Speaker Change: This quarter, we started to report total company backlog, excluding shipments into the hubs to provide a more accurate measure of backlog and we have restated last year's number as a result.
Speaker Change: As I mentioned earlier, our aerospace and defense program backlog was $155 billion at the end of Q1, this year compared to $1 $38 billion.
Speaker Change: At the end of the first quarter of last year.
Speaker Change: Our overall book to Bill ratio was 110 for the three months ending March 31.
Speaker Change: Now Dan will review, our financial performance for the first quarter Dan.
Dan Bailey: Thanks, Tom and good afternoon, everyone.
Dan Bailey: Highlights of our first quarter financial results were included in the press release distributed today and are summarized on slide six of the earnings presentation posted on our website.
Dan Bailey: For the first quarter net sales were $648 7 million.
Dan Bailey: Compared to $571 million in the first quarter of 2024.
Dan Bailey: The 14% year over year increase was due to growth in our aerospace and defense data center computing networking and medical industrial and instrumentation end markets.
Dan Bailey: Partially offset by declines in our automotive end market.
GAAP operating income for the first quarter of 2025 was $50 3 million.
Dan Bailey: Compared to GAAP operating income for the first quarter of 2024 of $17 1 million.
Dan Bailey: On a GAAP basis net income in the first quarter of 2025 was $32 2 million or <unk> 31 per diluted share.
Dan Bailey: This compares to GAAP net income for the first quarter of 2024 of $10 5 million or <unk> 10 per diluted share.
Dan Bailey: The remainder of my comments will focus on our non-GAAP financial performance, our non-GAAP performance excludes M&A related costs restructuring costs certain noncash expense items, such as amortization of intangibles impairment of goodwill stock compensation gains on the sale of property unrealized gains or loss.
Dan Bailey: On foreign exchange and other unusual or infrequent items.
Dan Bailey: Present, non-GAAP financial information to enable investors to see the company through the eyes of management and to facilitate comparisons with expectations in prior periods.
Dan Bailey: Gross margin in the first quarter was 28% and compares to 18, 8% in the first quarter of 2024.
Dan Bailey: The year on year increase was due to higher sales volume, particularly in the aerospace and defense data center computing and networking end markets and improved operational execution.
Dan Bailey: Selling and marketing expense was $20 3 million in the first quarter or three 1% of net sales versus $19 4 million or three 4% of net sales a year ago.
Dan Bailey: First quarter G&A expense was $38 9 million and 6% of net sales compared to $40 million or 7% of net sales in the same quarter a year ago.
Dan Bailey: In the first quarter of 2025 research and development was $7 8 million or one 2% of net sales compared with $7 million or one 2% of net sales in the same quarter last year.
Dan Bailey: Our operating margin in the first quarter of 2025 was 10, 5% a 340 basis points increase from seven 1% in the same quarter last year due to the increase in gross margins and a steady level of selling general and administrative costs.
Dan Bailey: Interest expense was $10 9 million in the first quarter of 2025% compared to $11 8 million in the same quarter last year.
Dan Bailey: During the first quarter of 2025, there was a 0.9 million realized foreign exchange gains below the operating income line compared to a 0.1 million realized foreign exchange gain in the first quarter of 2024.
Dan Bailey: Government incentives and interest income totaling $3 $5 million resulted in a net $4 $4 million gain or <unk> <unk> positive impact to EPS in the current quarter.
Dan Bailey: This compares to a net gain of $5 million.
Dan Bailey: <unk> <unk> positive impact on EPS in the same quarter of last year.
Dan Bailey: Our effective tax rate was 15% in the first quarter, resulting in a tax expense of $9 3 million.
Dan Bailey: This compares to a rate of 14% or a tax expense of $4 7 million in the same quarter last year.
Dan Bailey: First quarter 2025, net income was $52 4 million.
Or <unk> 50 per diluted share.
Dan Bailey: This compares to first quarter 2024, net income of $29 1 million or 28 per diluted share.
Dan Bailey: Adjusted EBITDA for the first quarter of 2025 was $99 5 million.
Dan Bailey: Or 15, 3% of net sales compared with first quarter 2024, adjusted EBITDA of $70 5 million or.
Dan Bailey: Or 12, 4% of net sales.
Dan Bailey: Prior year results have been revised to exclude the impact of unrealized gains or losses on foreign exchange from non-GAAP net income non-GAAP EPS and adjusted EBITDA. Please refer to the revised historical non-GAAP financial information in the form 8-K filed on February five 2025 for further information.
Dan Bailey: Depreciation for the quarter was $26 9 million.
Dan Bailey: Net capital spending for the quarter was $63 $2 million as we made our final payment related to the Malaysia facility. While also ramping expenditures on our new facility in Syracuse, New York as Tom mentioned earlier.
Dan Bailey: Cash flow from operations in the first quarter of 2025 was a net cash usage of $10 7 million.
Dan Bailey: Primarily due to timing of receivables as we had a strong fourth quarter last year and some of our OEM customers change to EMS companies with longer payment terms in this quarter.
Dan Bailey: Our operating cash flows generally trend upward throughout the year. So we expect to recover this cash from fall through on increased revenue and focused management of networking capital.
Dan Bailey: We bought back 700000 shares of stock in the quarter for $17 $9 million cash.
Dan Bailey: Cash and cash equivalents at the end of the first quarter of 2025 totaled $411 3 million.
Dan Bailey: Our net debt divided by last 12 months EBITDA was one three.
Dan Bailey: Now I will turn to our guidance for the second quarter of 2025.
Dan Bailey: We project net sales for the second quarter of 2025 to be in the range of $650 million to $690 million and non-GAAP earnings to be in the range of 49 to 55 per diluted share, which is inclusive of operating costs associated with starting up our Penang facility.
Dan Bailey: The EPS forecast is based on a diluted share count of approximately 104 million shares which includes the dilutive effect of outstanding stock options and other stock awards.
Dan Bailey: We expect SG&A expense to be about eight 9% of net sales in the second quarter and R&D to be about one 2% of net sales.
Dan Bailey: We expect interest expense of approximately $11 4 million and.
Dan Bailey: And interest income of approximately $3 million we.
Dan Bailey: We estimate our effective tax rate will be between 13% and 17%.
Dan Bailey: Further we expect to record depreciation of approximately $28 1 million amortization.
Dan Bailey: Of intangibles of approximately $9 2 million stock based compensation expense of approximately $8 5 million.
Dan Bailey: And noncash interest expense of approximately zero point $5 million.
Dan Bailey: Finally, I'd like to announce that we will be participating in the Barclays leveraged Finance conference in Austin, Texas on May 20-F, the B Riley Investor Conference in Los Angeles, California on May 21.
Dan Bailey: And the Stifel Cross sector insight conference in Boston, Massachusetts on June 3rd.
Dan Bailey: That concludes our prepared remarks, now I would like to open the line for questions operator.
Speaker Change: Thank you to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question Press Star One again, one moment, while we compile the Q&A roster.
Speaker Change: And our first question will come from the line of William Stein with <unk> Securities. Your line is open.
William Stein: Thanks for taking my questions.
I should say congrats on these pretty great results.
William Stein: And outlook.
William Stein: I would like to ask about <unk>.
William Stein: Tom perhaps you can remind us or just fill in some blanks revenue at that facility during Q1.
William Stein: Margins in the quarter order or the margin drag that we're seeing in that.
William Stein: At that facility to the overall results and the anticipated trajectory of revenue and margins over the next couple of quarters.
William Stein: Okay.
William Stein: Okay, So sure thing well.
William Stein: Let me just give you a feel for that.
William Stein: Number one.
Speaker Change: And thank you by the way I appreciate the kind words in terms of Penang first quarter performance.
Speaker Change: We're at about $2 $2 million in revenue.
Speaker Change: As the initial.
Speaker Change: Commercial volume of revenue.
Speaker Change: Obviously, as we build revenue where we're.
Speaker Change: Adding in direct labor, so not a not a huge impact in terms of.
Speaker Change: Operating income loss.
Speaker Change: Which was approximately 11 11, five or so million.
Speaker Change: As we ramp going forward.
Speaker Change: We're looking at at steadily improving.
Speaker Change: That situation.
Speaker Change: Certainly at this point with a strong book to Bill in Q1, that's a real positive looking into Q2.
Speaker Change: And into Q3 by the end of Q3, we are still hoping to be at a breakeven point.
Speaker Change: So.
Speaker Change: That's a steep ramp obviously, we're looking at breakeven is somewhere between 30% and $35 million in terms of revenue.
Speaker Change: So.
Speaker Change: Looking to continue a rapid ramp of the facility here.
Speaker Change: And as you can expect it's like any ramp we've got it's good to see volume production getting pushed out and yielding volume production.
Speaker Change: That's the positive and then every day of course, we run into those.
Speaker Change: Those challenges that come with you as you start to turn up the speeds on equipment.
Speaker Change: And processing speed so.
Speaker Change: So doing a lot of learning in the meantime, but but steadily ramping.
Speaker Change: Thank you.
Speaker Change: I believe William Stein trough, let me go ahead and remove and bring him back.
Speaker Change: Mr. Stein your line is open.
Speaker Change: Great. Thanks, guys I missed most of that but I will get it from the transcript I did want to ask.
Speaker Change: Something else about.
Speaker Change: The aerospace and defense business did very well there in the quarter.
Speaker Change: But we did see program backlog.
Speaker Change: Declined slightly sequentially and I think it hasnt done that in a while and I'm, hoping you can explain that is that a matter of just.
Speaker Change: Getting perhaps a bit better availability on components and labor such that we're able to work down backlog a little bit or.
Speaker Change: Any other way we can understand this from a sort.
Speaker Change: Longer term context I'd appreciate it thank you.
Speaker Change: Sure.
Speaker Change: Yes, so so book to Bill in Defense was <unk> 96.
Speaker Change: <unk>.
Speaker Change: So darn close to one to one.
Speaker Change: Did that program backlog number came down 100 100.
Speaker Change: K I guess that would be when it came down to <unk> came down from 156% to 155 billion.
Speaker Change: So pretty small small decrease.
Speaker Change: <unk>.
The real point, there being we actually expected Q4 was was if you remember a terrific bookings quarter for us and.
Speaker Change: We expected Q1.
Speaker Change: Come down further we are actually positively surprised by the.
Speaker Change: Bookings level in the bookings that were brought forward into Q1.
From Q2, we're seeing and expecting to see similar behaviors in Q2 so.
Speaker Change: I would not say that I think bookings continued to be strong and particularly for the beginning of the year, which is usually where you where you find bookings slowed down a little bit.
Speaker Change: So.
Speaker Change: So I think we're in great shape there.
Speaker Change: I would say well.
Speaker Change: I'm very proud of how.
Speaker Change: Our defense operations, both in integrated electronics non PCB.
Speaker Change: As well as on the PCB side.
Speaker Change: How well the facilities operated.
Speaker Change: Frankly, usually we find coming off of Q4 that we get a little bit of a dip in production output.
Speaker Change: This this year.
Speaker Change: The operations team did an outstanding job coming into Q1 off of a very strong Q4, continuing to operate well.
Speaker Change: Continuing to do well throughout the quarter.
Speaker Change: So, yes, we were able to bring past dues down a bit which is critical for us we need to execute on behalf of our customers.
Speaker Change: Glad to see that come down a little bit glad to see the bookings strength maintain.
Speaker Change: Really really pleased with where we are right now in the defense end market. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you one moment our next question.
Speaker Change: And then will come from the line of Jim Ricchiuti with Needham <unk> Co. Your line is open.
Speaker Change: Good afternoon.
Speaker Change: I just wanted to follow up on <unk>.
Speaker Change: Question about Tom.
Speaker Change: Tom I think you talked about is the overview multiple customer qualifications can you give us a sense as to how many customers you are qualified with the facility.
Speaker Change: Which market verticals.
Speaker Change: Okay.
Speaker Change: So we have we had four anchor customers. There we've been qualifying of course actively with those four but beyond that.
Speaker Change: You can add.
Speaker Change: We're in qualification with just less.
Speaker Change: Say approximately 10.
Speaker Change: Customers overall that number continues to increase.
Speaker Change: Jim.
Speaker Change: The pace of qualification varies according to customer.
Speaker Change: We have worked through the bulk of qualifications with the anchor customers are still.
Speaker Change: There is still.
Speaker Change: Some work to do there.
Speaker Change: But we've continued that steady pace of qualifications and of course that will be an ongoing process because customers always qualify you qualify for new programs as well we.
Speaker Change: We haven't reached that steady state I think we're still there's still.
Speaker Change: Customers, where we need to wrap up.
Speaker Change: The initial qualifications.
Speaker Change: But we are making good good progress there so.
Speaker Change: Good good momentum in terms of qualifications.
Speaker Change: And also the additional customers that we're bringing you can imagine of course, the tariff situation out there.
Speaker Change: Add adds a bit of.
Speaker Change: Further momentum in terms of customer interest.
Speaker Change: Is it skewed to any one market Oh, yes. Thank you. Thank you sorry, I missed the answering that part.
Speaker Change: It is.
Speaker Change: So always has been.
Speaker Change: A volume standpoint, a little bit skewed towards data center.
Speaker Change: And networking customers.
Speaker Change: And then we also have medical industrial instrumentation.
Speaker Change: In there as well, but if you. So if you look at number of customers.
Speaker Change: Hi areas higher but in terms of revenue contribution data center.
Speaker Change: And networking are where the concentration is.
Speaker Change: Got it and just as a follow up.
Speaker Change: So.
Speaker Change: At least thus far.
Speaker Change: Seeing much of a change in customer.
Speaker Change: <unk> here from the administration policy I was wondering though.
Speaker Change: Which verticals outside of AMD.
Speaker Change: Have the strongest line of sight looking beyond Q2.
Speaker Change: Yes. Thank you yes. Thank you so yes I was thinking through this I think if you.
Speaker Change: Another way to think about it is.
Speaker Change: So its visibility both short term and also in terms of sensitivity to tariffs.
Speaker Change: And if you start to go through our end markets of course.
Speaker Change: Always in the news is probably number one in terms of potential tariff impact is automotive.
Speaker Change: I've been encouraged to see some movement there.
Speaker Change: Not just automotive sales, but also tier one parts.
Speaker Change: Coming in to the U S. Good to see the administration recognizes the importance.
Speaker Change: Of.
Speaker Change: Sure.
Speaker Change: That industry.
Speaker Change: And so we'll see where that goes but certainly that's an area that that is more sensitive than the others to tariffs.
Speaker Change: Second would be the NII area medical.
Speaker Change: Clearly influenced by China.
Speaker Change: And impacted by China, because that is an important market for medical equipment.
Speaker Change: And so watching that area.
Speaker Change: <unk> to the extent that.
Speaker Change: That we run into any kinds of economic issues, because industrial highly tied to investments capital investments out there. So.
Speaker Change: Could be positively influenced by.
Speaker Change: Capital investments in the U S, but negatively impacted if that if the if the economy.
Speaker Change: Is impacted by this and then instrumentation most closely tied to the semiconductor capital equipment market.
Speaker Change: And there of course, the export controls, we'll see what kind of impact that has.
Speaker Change: Here on the industry.
Speaker Change: So I would put <unk> as a second area just to put it to watch and again I would say short term, we have not seen and in fact, they're in factory I came off a strong quarter and expecting another strong quarter in Q2.
Speaker Change: And then finally data center and networking you really have to put them together both heavily impacted by investment in generative AI and data center investments, we highlighted on the script that a lot of that we are expecting investment positive investment momentum in the U S.
Speaker Change: Yes.
Speaker Change: I think this is an area of ongoing strength.
Speaker Change: Here.
Speaker Change: And then Andy as you mentioned Jim certainly.
Speaker Change: Not not impacted by by tariffs certainly not on the demand side.
Speaker Change: No.
Speaker Change: As you think about TTM.
Speaker Change: And do you think about how that adds up.
Speaker Change: And data center collectively.
Speaker Change: We're looking at at over over 70% closing in on 80% of our revenue depending on the quarter and then you've got that piece of the <unk>.
Speaker Change: It is coming at anywhere from 10 to 15, and then the balance in the auto so.
Speaker Change: I think we're in good strong shape here as we look into.
The potential impact of tariffs and the balance of the year.
Speaker Change: Got it that's great color. Thank you and congratulations thank you Jim.
Speaker Change: Thank you one moment our next question.
Speaker Change: And that will come from the line of Ruben Roy with Stifel. Your line is open.
Speaker Change: Thank you.
Speaker Change: Tom Thanks, very much sure.
Speaker Change: Detail around how you're thinking about the tariff environment I guess the first question I'd have is.
Speaker Change: Understanding that you talked about not really seeing any meaningful changes in behavior from customers, but I guess when you look at the data center business doing a bit better and network and continue to have momentum any signs at this point that there is some pull in activity going on ahead of sort of more clarity into how the tariffs.
Speaker Change: The pans out for the second half of the year.
Speaker Change: I don't see that in.
Speaker Change: The data center the networking area.
Speaker Change: To be Frank I think.
Speaker Change: Both areas are acting.
Speaker Change: Really much more as.
Speaker Change: So I would never say predictable because certainly when it comes to data center their programs that ramp in programs that fall off but I haven't seen.
Speaker Change: Mentum that I would call unusual in regards to in regards to program. So.
Speaker Change: So haven't seen it there I think.
Speaker Change: It's harder to tell with with medical industrial instrumentation, because certainly.
Speaker Change: Our North America bookings in that area have been strong.
Speaker Change: That could be.
Speaker Change: Because customers are alright.
Speaker Change: All right thinking about tariff impacts.
Speaker Change: We haven't I wouldn't say that we have seen a lot of change in <unk>.
Speaker Change: Behavior in terms of orders coming out of China.
Speaker Change: Much of the assembly in my eye.
Speaker Change: Actually takes place with contract manufacturers outside of the U S and so.
Speaker Change: Again customers look at this I wouldn't.
Speaker Change: I don't think there is a major reason for our shift in behavior there.
Speaker Change: And frankly as I mentioned in the script, we haven't even seen customers move CMS, even where they where they have CMS doing assembly and in the U S. I haven't seen we haven't seen a big shift there.
Speaker Change: So right now it seems like a fairly fairly steady state from what we're seeing.
Speaker Change: Yes, that's true.
Paul: Paul on.
Paul: On that point around shifts on CMS Thats interesting.
Paul: I guess you hinted at this when you answered <unk> question.
Paul: In terms of.
Paul: Potentially getting some further momentum and I guess.
Paul: The question would be around the competitive dynamics with a lot of your competitors on the PCB side certainly.
Paul: Based in Asia, I mean, it seems to me like there might be an opportunity for you there and wondering if those types of conversations have started yet with your customers or is it too early for that.
Paul: At this point.
Paul: A lot of a lot of conversation.
Paul: Absolutely and I would say beyond <unk>.
As it impacts our facilities and our commercial facilities in Toronto.
Paul: And in Logan, Utah and in San Jose.
Paul: So we're doing a lot of a lot of certainly their exercises that occur that we're doing with customers.
Paul: And trying to help them look ahead I think.
Paul: Again, not not a short term impact there certainly longer term modeling.
Paul: Penang facility better better set up to handle future volume needs. We're just trying to also ensure that the that the product type.
Paul: It fits into what we can do most efficiently in Penang, which tends to be higher layer count production.
Paul: Production of boards.
Paul: And so.
Paul: So yes, there is quite a bit of modeling going on to make ensuring that we are that we're really hitting that sweet spot in terms of production capability.
Paul: And I would just.
Speaker Change: Remind remind you also rubin.
Paul: Our competition doesn't sit still.
Paul: And certainly they are building facilities, particularly in Thailand.
Paul: To compete so we.
Paul: We do I think have a bit of a first mover advantage here in Penang.
But we're never.
Paul: Our customers are our competitors are always quick to act and certainly.
Paul: Our customers are going to have other options here.
Paul: Southeast Asia.
Paul: Are determined to make Penang the best choice.
Tom: Understood. Thank you Tom.
Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one one.
Speaker Change: Question will come from the line of Mike Crawford with B Riley Securities. Your line is open.
Speaker Change: Thank you just back to the.
Speaker Change: Direct revenue impact of tariffs, you mentioned only 3% to 4%.
Speaker Change: Direct imports to the U S from your customers, but do you have any sense of what percent.
Speaker Change: What you ship elsewhere like to Foxconn in Taiwan from China that wood.
Speaker Change: Then eventually would come into the U S and potentially be subject to tariffs.
Mike: That is a great question Mike.
Speaker Change: I do not I do not have a sense for that because if if.
Mike: If you take.
Mike: Most of these products that are being built by by the CMS Theyre going to go to multiple destinations.
Mike: So it's hard really hard for us to gauge, where where where those shipments are going to go.
Mike: You can to the extent that a shipment goes into Mexico, you can usually count on the fact that it's going to go the end product. We will end up in the U S. But that's a small small portion of what we're shipping so.
Mike: Much harder to gauge when a shipment goes into southeast Asia.
Mike: Say so.
Mike: So wish I had the answer but I really don't to that question.
Mike: Okay, well I have another maybe potentially hard won.
Mike: Cheers.
Mike: In General do you have a sense of what your PCB.
Mike: Manufacturing capacity share is globally outside of China or in the U S or may be after Syracuse.
Mike: Ramps.
Mike: But then the answer might be and if thats different that youre talking about advanced.
Mike: Hi layer count boards.
Mike: Okay. So.
Mike: If you look at at probably the easiest.
Mike: Yes.
Mike: Easiest gauge I can give you in terms of North American production.
Mike: We continue to be.
Mike: The largest by by a factor in terms of.
Mike: PCB production.
Mike: And with Syracuse.
Mike: Coming on in terms of advanced.
Mike: Technology.
Mike: Printed circuit board production will really be the only company with scale or capability.
Mike: Two to produce advanced printed circuit board. So that one is easier to answer in terms of outside of China.
Mike: Capacity.
Mike: Right now certainly again, where.
Mike: We are close to the to the largest there I haven't seen any.
Mike: Any real industry studies that give me a good compare on that.
Mike: As you know globally, we're about number five on the list of global production capability and you can.
Mike: And most of those companies are they compete with us or in China, or that's where they have the bulk of their production capacity. So I.
Mike: I think again.
Mike: What I like about the TTM footprint I've always liked about it is our strength in North America.
Mike: Inclusive of Canada, as well as the U S and now we've added a critical cog here with Penang coming on so really really pleased with with our footprint situation.
Mike: Okay. Thank you and then one final question for me is.
Mike: So is this 150 billion reconciliation bill that.
Mike: That came out of the house and Senate Armed services committees.
Mike: On pages 10 and 11.
Mike: Specific programs.
Mike: Specifically your question about the integrated Air and missile Defense is there anything that stands out there or otherwise of that bill that youre looking at the Glen.
Mike: Upside too.
Mike: Okay.
Mike: So the percent of revenue that youre looking at for aerospace and defense.
Mike: Well I think we highlighted.
Mike: When youre looking at AD programs that tie to <unk>.
Mike: Air Missile defense radar systems.
Mike: That those are those are programs that are right in our wheelhouse and.
Mike: Allow us to have additional content opportunity beyond the.
Mike: Beyond the board.
Mike: So from that standpoint, very very pleased.
Mike: With with where that where that reconciliation bill maybe going.
Mike: And.
Mike: So so that should be.
Mike: Positive again.
Mike: The details of that are being worked out so.
Mike: So I think it's the right area.
Mike: We certainly we highlighted Golden Dome, I think Thats again, a strong areas. If you look at the programs that are tied.
Mike: Add to that.
Mike: To the to the general plan there.
Mike: Those are opportunities and opportunities, where we already have content in most cases.
Mike: <unk>.
Mike: Certainly.
Mike: The direction is a good one as you know we don't we generally will not see the actual business for approximately 18 months to 24 months.
Mike: After our budget is agreed upon.
Mike: But this is definitely a good direction.
Mike: As is certainly the administration comments on potential.
Mike: Potential 2026 budget of over a trillion dollars.
Mike: Okay, great well, thank you very much.
Mike: Great. Thank you appreciate it.
Speaker Change: Thank you I'm showing no further questions in the queue. At this time I would now like to turn the call back over to Mr. Tom Edman for any closing remarks.
Tom Edman: Thank you <unk> I would like to just close by summarizing some of the points. We made earlier first we delivered strong revenue growth in Q1 up 14% year on year drill.
Tom Edman: Driven by Aerospace and defense data center computing and networking markets.
Tom Edman: Our non-GAAP operating margin of 10, 5% was up 340 basis points year on year and was the third consecutive quarter of double digit margin for TTM and third we achieved record high non-GAAP operating margin and non-GAAP EPS for the first quarter better than that.
Tom Edman: Normal seasonal trends, we continue to make strong progress on our strategic imperatives around Syracuse and Penang.
Tom Edman: And in closing I, just wanted to thank our employees, our customers and investors for a year and their continued support.
Tom Edman: As we continue to move in a positive strategic direction for TTM. Thank you very much.
Tom Edman: This concludes today's program. Thank you all for participating you may now disconnect.
Tom Edman: Okay.
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Tom Edman: Sure.
Tom Edman: Sure.