Q1 2026 TTM Technologies Inc Earnings Call

April 29, 2026

Speaker #2: Good day, and welcome to the TTM Technologies Q1 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session.

Operator: Good day. Welcome to the TTM Technologies Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Sean Hannan, Vice President of Investor Relations. Please go ahead.

Speaker #2: To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

Speaker #2: To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Sean Hannon, Vice President of Investor Relations, please go ahead.

Sean Hannan: Greetings, everyone. Welcome and thank you for joining us today. I'm Sean Hannan, Vice President of Investor Relations for TTM. With me on the call are Edwin Roks, our President and Chief Executive Officer, and Daniel Boehle, our Executive Vice President and Chief Financial Officer. Before we get started, I'd like to remind everybody 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, including 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 management's expectations and assumptions based on currently available information.

Speaker #3: Greetings, everyone. Welcome, and thank you for joining us today. I'm Sean Hannon, Vice President of Investor Relations for TTM. With me on the call are Edwin Roks, our President and Chief Executive Officer, and Dan Boehle, our Executive Vice President and Chief Financial Officer.

Speaker #3: Before we get started, I'd like to remind everybody 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.

Speaker #3: Including the risks factors we provide in our filings with the securities and exchange commission, which we encourage you to review. These forward-looking statements represent management's expectations and assumptions based on currently available information.

Sean Hannan: TTM does not undertake any obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events, or other circumstances, except as required by law. We will 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 reconciliations between GAAP and non-GAAP measures included in the company's earnings release, which is available on the investor relations section of TTM's website at investors.ttm.com. We have also posted on the website an earnings presentation that we will refer to during our call. Here is Edwin.

Speaker #3: TTM does not undertake any obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events, or other circumstances except as required by law.

Speaker #3: We will 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 reconciliations between GAAP and non-GAAP measures included in the company's earnings release.

Speaker #3: Which is available on the investor relations section of TTM's website at investors.ttm.com. We have also posted on the website an earnings presentation that we will refer to during our call.

Speaker #3: Here is Edwin.

Speaker #4: Thank you, Sean. Good afternoon, everyone, and thank you for joining us for our first quarter 2026 conference call. At TTM TECHNOLOGIES, we are focused on designing and manufacturing complex products and solutions in two strategic directions.

Edwin Roks: Thank you, Sean. Good afternoon, everyone, and thank you for joining us for our Q1 2026 Conference Call. At TTM Technologies, we are focused on designing and manufacturing complex products and solutions in two strategic directions. The first is advanced interconnect, which includes highly complex printed circuit boards, substrates, and advanced packaging. The second strategic direction builds on our advanced interconnect technology to design and manufacture sophisticated modules, subsystems, and systems. Examples of this include our RF modules, thermal and power management systems, edge and AI processing products, as well as complex subsystems and fully integrated mission systems. We believe the future of electronics lies in speed to market, high reliability, and efficient technology integration. The markets in which we do business continue to demand highly complex technology solutions in an increasingly compact size and footprint.

Speaker #4: The first is advanced interconnect, which includes highly complex printed circuit boards, substrates, and advanced packaging. The second strategic direction builds on our advanced interconnect technology to design and manufacture sophisticated modules, subsystems, and systems.

Speaker #4: Examples of this include our RF modules, thermal and power management systems, edge and AI processing products, as well as complex subsystems and fully integrated mission systems.

Speaker #4: We believe the future of electronics lies in speed to market, high reliability, and efficient technology integration. The markets in which we do business continue to demand highly complex technology solutions in an increasingly compact size and footprint.

Speaker #4: Our strategy is to stay at the cutting edge of advanced interconnect technologies through innovation and continue to move up the value chain into complex modules and subsystems that combine sensors, actuators, RF, and photonics.

Edwin Roks: Our strategy is to stay at the cutting edge of advanced interconnect technologies through innovation and continue to move up the value chain into complex modules and subsystems that combine sensors, actuators, RF, and photonics. We engage early with our customers to ensure alignment on product developments and speed to markets while also enabling optimal management of their complex supply chains. From a demand standpoint, we are experiencing healthy multi-year tailwinds due to our participation in two key megatrends currently driving economic growth, artificial intelligence and defense. We previously stated that approximately 80% of our net sales are related to these two megatrends, and that this puts us in a unique position to benefit our investors. Our ability to seize these organic growth opportunities requires our continuous focus on technological innovation, as well as expanding our capacity across our strategic footprint.

Speaker #4: We engage early with our customers to ensure alignment on product developments and speed to markets while also enabling optimal management of their complex supply chains.

Speaker #4: From a demand standpoint, we are experiencing healthy multi-year tailwinds due to our participation in two key megatrends currently driving economic growth. Artificial intelligence and defense.

Speaker #4: We previously stated that approximately 80% of our net sales are related to these two megatrends, and that this puts us in a unique position to benefit our investors.

Speaker #4: Our ability to seize these organic growth opportunities requires our continuous focus on technological innovation as well as expanding our capacity across our strategic footprint.

Speaker #4: We are further investing capital and resources to take full advantage of these opportunities today and in the future through our global footprint, which offers our customers manufacturing options across 24 sites located in China, Malaysia, Canada, and the States.

Edwin Roks: We're further investing capital and resources to take full advantage of these opportunities today and in the future through our global footprint, which offers our customers manufacturing options across 24 sites located in China, Malaysia, Canada, and the United States. We stand well-positioned to support this growth across our end markets, and we are tracking well ahead of our previously communicated plan to grow revenues 15% to 20% per year for the next 3 years and to double our earnings from 2025 to 2027, which were goals that were reiterated on our 4 February earnings call. In our commercial segments, we are highly focused on supporting the demand wave of artificial intelligence in the data center and networking end markets, where customer demand has materially accelerated.

Speaker #4: We stand well positioned to support this growth across our end markets, and we are tracking well ahead of our previously communicated plan to grow revenues 15% to 20% per year for the next three years, and to double our earnings from 2025 to 2027, which were goals that were reiterated on our February 4th earnings call.

Speaker #4: In our commercial segment, we are highly focused on supporting the demand wave of artificial intelligence in the data center and networking end markets, where customer demand has materially accelerated.

Speaker #4: We are also focused on evolving opportunities in the use of automation and AI in our medical, industrial, and instrumentation end markets, while we remain strategically positioned in automotive, where our highly valuable solution designs are positioned to benefit from competitor consolidation and have additional transfer application into other markets.

Edwin Roks: We are also focused on evolving opportunities in the use of automation and AI in our medical, industrial, and instrumentation end markets, while we remain strategically positioned in automotive, where our highly valuable solution designs are positioned to benefit from competitor consolidation and have additional transfer application into other markets. In our Aerospace and Defense end markets, we continue to excel with our leading position in advanced interconnect products, and we work to expand our product offerings in integrated electronics, including modules, subsystems, and full mission systems.

Speaker #4: In our aerospace and defense end markets, we continue to excel with our leading position in advanced interconnect products, and we work to expand our product offerings in integrated electronics, including modules, subsystems, and full mission systems.

Edwin Roks: Recently, we were proud to be a participant in the success of Artemis II mission with our microelectronics, PCBs, and assemblies for both the space launch vehicle and the Orion crew capsule. As for this current state of the defense budget, as well as the geopolitical environment, considering the conflict in Iran, our solutions are ever present in the categories of advanced radar systems, advanced jamming systems, missiles and decoys, electronic surveillance systems, and satellite and ground-based communication systems. In the commercial aerospace market, we recently won an award from an innovative electric autonomous aerospace company for light passenger travel to provide the sense and avoid radar system for their autonomous aircraft. I'll now begin with an overview of our business highlights from the quarter. We'll follow up with a summary on our Q1 fiscal 2026 financial performance and our Q2 and fiscal 2026 guidance.

Speaker #4: Recently, we were proud to be a participant in the success of Artemis II mission with our microelectronics PCBs and assemblies for both the space launch vehicle and the Orion crew capsule.

Speaker #4: As for this current state of the defense budget, as well as the geopolitical environment considering the conflict in Iran, our solutions are ever present in the categories of advanced radar systems, advanced jamming systems, missiles, and decoys, electronic surveillance systems, and satellite and ground-based communication systems.

Speaker #4: In the commercial aerospace market, we recently won an award from an innovative electric autonomous aerospace company for light passenger travel to provide the sense and the void radar system for their autonomous aircraft.

Speaker #4: I'll now begin with an overview of our business highlights from the quarter. Then we'll follow up with a summary on our Q1 fiscal 2026 financial performance and our Q2 and fiscal 2026 guidance.

Speaker #4: We will then open the call to your questions. We delivered an excellent first quarter of 2026, and I would like to thank our employees for delivering these results.

Edwin Roks: We will open the call to your questions. We delivered an excellent Q1 2026, and I would like to thank our employees for delivering these results. We achieved sales of $846 million and non-GAAP EPS of $0.75 per diluted share, both above our guidance issued in early February and both all-time quarterly highs. Sales grew 30% year-on-year, reflecting continued demand strength in our data center and networking end market, driven by the requirements of AI, while our medical, industrial, instrumentation, and Aerospace and Defense end markets also experienced strong growth. The company-adjusted EBITDA margin was 15.7% in Q1 2026, compared to 15.3% in the prior year, largely reflecting positive mix impacts. non-GAAP EPS of $0.75 per diluted share was a 50% improvement year-on-year.

Speaker #4: We achieved sales of 846 million and non-gap EPS of 75 cents per diluted share. Bought above our guidance issued in early February and bought all-time quarterly highs.

Speaker #4: Sales grew 30% year on year, reflecting continued demand strength in our data center and networking end market, driven by the requirements of AI, while our medical, industrial, and instrumentation and aerospace and defense end markets also experienced strong growth.

Speaker #4: The company adjusted EBITDA margin was 15.7% in the first quarter of 2026 compared to 15.3% in the prior year, largely reflecting positive mix impacts.

Speaker #4: Non-gap EPS of 75 cents per diluted share was a 50% improvement year on year. The aerospace and defense end market represented 40% of first quarter 2026 sales.

Edwin Roks: The Aerospace and Defense end market represented 40% of Q1 2026 sales. Sales in the Aerospace and Defense market grew 11% year-on-year for Q1. The sales growth in Defense market continues to be a result of positive tailwinds in defense budgets, our strong strategic program alignment, and key bookings for ongoing programs. During Q1 2026, we saw significant A&D bookings related to the LTAMDS air defense radar, AN/APS-153 maritime surveillance radar, and a transportable radar surveillance system for ballistic missile detection and tracking. In addition, we continue to see an increase in bookings for restricted programs, and we also have first booking that was confirmed to support Golden Dome. A&D booked bill was 1.1 for the quarter, which led to a program backlog of $1.6 billion, similar to a level a year ago.

Speaker #4: Sales in the aerospace and defense market grew 11% year on year, for the first quarter. The sales growth in defense market continues to be a result of positive tailwinds in defense budgets, our strong strategic program alignment, and key bookings for ongoing programs.

Speaker #4: During the first quarter of 2026, we saw a significant A&D bookings related to the LTAMS air defense radar APS-153 maritime surveillance radar and a transportable radar surveillance system for ballistic missile detection and tracking.

Speaker #4: In addition, we continue to see an increase in bookings for restricted programs, and we also have the first booking that was confirmed to support Golden Dome.

Speaker #4: A&D booked will was 1.1 for the quarter which led to a program backlog of 1.6 billion similar to a level a year ago. We expect second quarter 2026 from this end market to represent 36% of our total sales while still delivering both year on year and sequential growth.

Edwin Roks: We expect Q2 2026 from this end market to represent 36% of our total sales, while still delivering both year-on-year and sequential growth. Sales in the data center and networking end market represented 36% of our Q1 2026 sales. This end market experienced 61% year-on-year growth in the Q1, above our growth expectation and reflecting continued demand strength from our data center and networking customers building out the AI data centers. For Q2 2026, we expect this end market to represent 42% of our net sales. The medical, industrial, and instrumentation end market represented 16% of the Q1 2026 sales. This end market saw year-on-year growth of 61% during the Q1, aided by healthy demand of AI-enabled robotics in medical, automated test equipment for AI applications in instrumentation.

Speaker #4: Sales in the data center and networking end market represented 36% of our first quarter 2026 sales. This end market experienced 61% year on year growth in the first quarter above our growth expectation and reflecting continued demand strength from our data center and networking customers building out the AI data centers.

Speaker #4: For the second quarter of 2026, we expect this end market to represent 42% of net sales. The medical, industrial, and instrumentation end market represented 16% of the first quarter 2026 sales this end market saw year on year growth of 61% during the first quarter aided by healthy demand of AI-enabled robotics in medical, automated test equipment for AI applications in instrumentation, a notable example win in the quarter was for a major continuous glucose monitoring custom product with our involvement on both the current and next generation which will feature and materially smaller footprint and more powerful performance.

Edwin Roks: A notable example win in the quarter was for a major Continuous Glucose Monitoring custom product with our involvement on both the current and next generation, which will feature a materially smaller footprint and more powerful performance. For Q2 2026, we expect medical, industrial, and instrumentation end markets to represent 14% of total sales, growing both sequentially and year-on-year. Automotive sales represented 8% of the Q1 2026 sales. We continue to be very selective in this market to focus on higher value add products that carry margin profiles consistent with our financial goals, as we also believe long-term business cycles should migrate back towards advanced capabilities. We are also supporting our tier one automotive customers as they transition some of their more advanced capabilities towards products serving ancillary end markets.

Speaker #4: For the second quarter of 2026, we expect medical, industrial, and instrumentation end markets to represent 14% of total sales growing both sequentially and year on year.

Speaker #4: Automotive sales represented 8% of the first quarter of 2026 sales we continue to be very selective in this market to focus on higher value-add products that carry margin profiles consistent with our financial goals as we also believe long-term business cycles should migrate back towards advanced capabilities.

Speaker #4: We are also supporting our Tier 1 automotive customers as they transition some of their more advanced capabilities towards products, serving, and accelerating end markets.

Speaker #4: We expect the automotive end market to represent about 8% of our total sales in the second quarter of 2026. The overall book-to-bill ratio was 1.41 for the first quarter of 2026, with the Commercial reporting segment at 1.65 and the A&D reporting segment at 1.10.

Edwin Roks: We expect the automotive end market to represent about 8% of our total sales in Q2 2026. The overall book-to-bill ratio was 1.41 for Q1 2026, with the commercial reporting segment at 1.65 and the A&D reporting segment at 1.10. At the end of Q1 2026, the 90-day backlog, which is subject to cancellations, was $787 million compared to $517 million a year ago. Daniel Boehle will summarize our financial performance for Q1. Dan?

Speaker #4: At the end of the first quarter of 2026, the 90-day backlog which is subject to cancellations was 787 million compared to 517 million a year ago.

Speaker #4: Now, Dan Bailey will summarize our financial performance for the first quarter. Dan?

Speaker #5: Thanks, Edwin. And good afternoon, everyone. I will review our financial results for the first quarter of 2026 that were included in the press release distributed today.

Daniel Boehle: Thanks, Edwin, and good afternoon, everyone. I will review our financial results for the Q1 of 2026 that were included in the press release distributed today.

Daniel Boehle: Key financial highlights are also summarized in the earnings presentation posted on our website. For Q1, our net sales were $846 million compared to $649 million in Q1 2025. The 30% year-over-year increase was due to continued strong growth in our data center and networking, medical, industrial, and instrumentation, and Aerospace and Defense end markets, partially offset by a more modest than anticipated decline in our automotive end market. GAAP operating income for Q1 2026 was $72.4 million compared to GAAP operating income for Q1 2025 of $50.3 million. On a GAAP basis, net income in Q1 2026 was $50 million or $0.47 per diluted share.

Speaker #5: Key financial highlights are also summarized in the earnings presentation posted on our website. For the first quarter, our net sales were 846 million dollars compared to 649 million dollars in the first quarter of 2025.

Speaker #5: The 30% year-over-year increase was due to continued strong growth in our data center and networking medical, industrial, and instrumentation and aerospace and defense end markets.

Speaker #5: Partially offset by a more modest than anticipated decline in our automotive end market. Gap-operated income for the first quarter of 2026 was 72.4 million dollars.

Speaker #5: Compared to GAAP-operated income for the first quarter of 2025 of $50.3 million, on a GAAP basis, net income in the first quarter of 2026 was $50 million, or $0.47 per diluted share.

Speaker #5: This compares to gap net income for the first quarter of 2025 of 32.2 million dollars or 31 cents per diluted share. The remainder of my comments will focus on our non-gap financial performance.

Daniel Boehle: This compares to GAAP net income for Q1 2025 of $32.2 million or $0.31 per diluted share. 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 non-cash expense items such as amortization of intangibles, impairment of goodwill, stock compensation, gains on the sale of property, unrealized gains or losses on foreign exchange, and other unusual or infrequent items. We 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. Gross margin in Q1 2026 was 22.3%, an increase of 150 basis points from 20.8% in Q1 2025.

Speaker #5: Our non-GAAP performance excludes M&A-related costs, restructuring costs, certain non-cash expense items such as amortization of intangibles, impairment of goodwill, stock compensation, gains on the sale of property, unrealized gains or losses on foreign exchange, and other unusual or infrequent items.

Speaker #5: We present non-GAAP financial information to enable investors to see the company through the eyes of management and to facilitate comparisons with expectations and prior periods.

Speaker #5: Gross margin in the first quarter of 2026 was 22.3%. An increase of 150 basis points from 20.8% in the first quarter of 2025. The year-on-year increase was due primarily to higher sales volume and favorable product mix.

Daniel Boehle: The year-on-year increase was due primarily to higher sales volume and favorable product mix, particularly in the data center, networking, and Aerospace and Defense end markets. Selling and marketing expense was $23.7 million in Q1, or 2.8% of net sales versus $20.3 million or 2.1% of net sales a year ago. Q1 general and administrative expense was $49.3 million or 5.8% of net sales, compared to $38.9 million or 6% of net sales in the same quarter a year ago. Our operating margin for Q1 of 2026 was 12.8%, a 230 basis point improvement from 10.5% in the same quarter last year.

Speaker #5: Particularly in the data center and networking, and aerospace and defense end markets. Selling and marketing expense was $23.7 million in the first quarter, or 2.8% of net sales.

Speaker #5: Versus 20.3 million dollars or 3.1% of net sales a year ago. First quarter general administrative expense was 49.3 million dollars or 5.8% of net sales compared to 38.9 million dollars or 6% of net sales in the same quarter a year ago.

Speaker #5: Our operating margin for the first quarter of 2026 was 12.8%. A 230 basis point improvement from 10.5% in the same quarter last year. The increase in the period was due both to the improved gross margin as well as operating leverage resulting from selling general and administrative expense discipline.

Daniel Boehle: The increase in the period was due both to the improved gross margin as well as operating leverage resulting from selling, general, and administrative expense discipline. Interest expense was $10 million in Q1 2026, compared to $10.9 million in the same quarter last year. Interest income was $2.5 million in Q1 2026, compared to $3 million in the same quarter last year. Realized foreign exchange and other non-operating income and expenses in Q1 2026 totaled a net expense of $6.8 million as compared to net income of $1.5 million in the same quarter last year.

Speaker #5: Interest expense was $10 million in the first quarter of 2026 compared to 10.9 million dollars in the same quarter last year. Interest income was 2.5 million dollars in the first quarter of 2026 compared to $3 million in the same quarter last year.

Speaker #5: Realized foreign exchange and other non-operating income and expenses in the first quarter of 2026 totaled a net expense of 6.8 million dollars. As compared to net income of 1.5 million dollars in the same quarter last year.

Speaker #5: The increased expense was driven by the weakening of the US dollar which resulted in a $7 million foreign exchange loss in the first quarter of 2026 as compared to a 0.9 million dollar gain in the same quarter last year.

Daniel Boehle: The increased expense was driven by the weakening of the US dollar, which resulted in a $7 million foreign exchange loss in Q1 2026, as compared to a $0.9 million gain in the same quarter last year. Our effective tax rate was 14.5% in Q1 2026, resulting in tax expense of $13.6 million. This compares to an effective tax rate of 15% or a tax expense of $9.3 million in the same quarter last year. Q1 2026 non-GAAP net income was $80.1 million or $0.75 per diluted share. This compares to Q1 2025 non-GAAP net income of $52.4 million or $0.50 per diluted share.

Speaker #5: Our effective tax rate was 14.5% in the first quarter of 2026, resulting in a tax expense of $13.6 million. This compares to an effective tax rate of 15% or a tax expense of $9.3 million in the same quarter last year.

Speaker #5: First quarter 2026 non-gap net income was 80.1 million dollars or 75 cents per diluted share. This compares to first quarter 2025 non-gap net income of 52.4 million dollars or 50 cents per diluted share.

Speaker #5: Adjusted EBITDA for the first quarter of 2026 was $132.9 million, or 15.7% of net sales, compared with first quarter 2025 adjusted EBITDA of $99.5 million, or 15.3% of net sales.

Daniel Boehle: Adjusted EBITDA for Q1 2026 was $132.9 million or 15.7% of net sales, compared with Q1 2025 Adjusted EBITDA of $99.5 million or 15.3% of net sales. Cash flow provided by operating activities was $21.7 million in Q1 2026, despite the increased net working capital supporting our continued revenue growth. This compares to cash used in operating activities of $10.7 million in the same quarter last year. Free cash flow in Q1 2026 was a net usage of $85 million as compared to net usage of $74 million in Q1 of last year, both periods reflecting increased capital expenditures in support of organic growth opportunities.

Speaker #5: Cash flow provided by operating activities was 21.7 million dollars in the first quarter of 2026 despite the increased networking capital supporting our continued revenue growth.

Speaker #5: This compares to cash used in operating activities of 10.7 million dollars in the same quarter last year. Free cash flow in the first quarter of 2026 was a net usage of 85 million dollars as compared to net usage of 74 million dollars in the first quarter of last year.

Speaker #5: Both periods reflecting increased capital expenditures in support of organic growth opportunities. Now I will turn to our guidance for the second quarter of 2026 and a directional outlook for fiscal 2026.

Daniel Boehle: Now I return to our guidance for Q2 2026 and a directional outlook for fiscal 2026. We project net sales for Q2 2026 to be in the range of $930 to 970 million, and non-GAAP earnings to be in the range of $0.82 to $0.88 per diluted share. In addition, considering the current demand dynamics reflected in our Q1 results and Q2 guidance, we believe that the net sales growth trajectory in H1 of the year should continue in H2. The Q2 2026 non-GAAP diluted EPS forecast is based on a diluted share count of approximately 107.5 million shares, which includes the dilutive effect of outstanding stock options and other stock awards.

Speaker #5: We project net sales for the second quarter of 2026 to be in the range of 930 million dollars to 970 million dollars. And non-gap earnings to be in the range of 82 cents to 88 cents per diluted share.

Speaker #5: In addition, considering the current demand dynamics reflected in our first quarter results and second quarter guidance, we believe that the net sales growth trajectory in the first half of the year should continue in the second half.

Speaker #5: The second quarter 2026 non-GAAP diluted EPS forecast is based on a diluted share count of approximately 107.5 million shares, which includes the dilutive effect of outstanding stock options and other stock awards.

Speaker #5: We expect SG&A expense to be about 7.4% of net sales in the second quarter, and R&D expenditures to be about 1% of net sales.

Daniel Boehle: We expect SG&A expense to be about 7.4% of net sales in Q2 and R&D expenditures to be about 1% of net sales. We expect interest expense of approximately $10.6 million, interest income of approximately $2.5 million, and realized foreign exchange and other non-operating expenses of approximately $6.9 million. We estimate our effective tax rate will be between 13% and 17%. Further, we expect to record depreciation of approximately $32.1 million, amortization of intangibles of approximately $9.2 million, stock-based compensation expense of approximately $11.5 million, and non-cash interest expense of approximately $0.5 million.

Speaker #5: We expect interest expense of approximately $10.6 million, interest income of approximately $2.5 million, and realized foreign exchange and other non-operating expenses of approximately $6.9 million.

Speaker #5: We estimate our effective tax rate will be between 13% and 17%. Further, we expect to record depreciation of approximately $32.1 million and amortization of intangibles of approximately $9.2 million.

Speaker #5: Stock-based compensation expense of approximately 11.5 million dollars. And non-cash interest expense of approximately 0.5 million dollars. Finally, I'd like to announce that we will be participating in the Barclays Leveraged Finance Conference in Austin, Texas on May 19th.

Daniel Boehle: I'd like to announce that we will be participating in the Barclays Leveraged Finance Conference in Austin, Texas on 19 May, and the B. Riley 2026 Investor Conference in Los Angeles, California on 20 May. In addition, we will host an Investor Day on 27 May at the Nasdaq Exchange in New York City, as announced in our press release last week.

Speaker #5: And to be Riley 2026 Investor Conference in Los Angeles, California on May 20th. In addition, we will host an investor day on May 27th at the NASDAQ Exchange in New York City as announced in our press release last week.

Speaker #5: That concludes our prepared remarks. Shari, we'll turn it over to you for questions.

Sean Hannan: That concludes our prepared remarks. Sheree, we will turn it over to you for questions.

Speaker #1: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, press *11 again.

Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. Please stand by while we compile the Q&A roster. Our first question will come from the line of Steven Fox with Fox Advisors. Your line is open.

Speaker #1: Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. Please stand by while we compile the Q&A roster.

Speaker #1: Our first question will come from the line of Steven Fox with Fox Advisors. Your line is open.

Steven Fox: Great. Thank you. Good, good afternoon, everyone. 2 questions if I could. First of all, I was wondering if you could maybe discuss the current interest you're seeing from your customers in bringing business into the Eau Claire facility as you ramp it. What kind of customers are looking at the facility, and maybe how have the discussions progressed versus a year ago? Then I had a follow-up.

Speaker #6: Great, thank you. Good afternoon, everyone. Two questions, if I could. First of all, I was wondering if you could maybe discuss the current interest you're seeing from customers in bringing business into the Euclare facility as you ramp it.

Speaker #6: What kind of customers are looking at the facility and maybe how have the discussions progressed versus a year ago? And then I had a follow-up.

Edwin Roks: Hi, Steven. Yeah, happy to answer your question. If we think about Eau Claire, I think we're making really good progress there. We are identifying, let's say, our anchor customers like we did in Penang, that's going well. A core team is identified to see what we're going to do. As you probably remember, it's about 750,000 square feet, and we have basically three modules. We can use them for both our commercial business or our defense business. We're very flexible at that. We're identifying the customers right now. We have, of course, our supplier agreements in place. We are dealing with our equipment vendors, that's going well.

Speaker #7: Hi, Steven. Yeah. Happy to answer your question. If we think about Euclare, I think we're making really, really good progress there. We are identifying, let's say, our anchor customers like we did at Penang.

Speaker #7: So, that's going well. A core team is identified to see what we're going to do. As you probably remember, it's about 750,000 square feet.

Speaker #7: And we have basically three modules. So we can use them for both our commercial business or our defense business. So we're very flexible with that.

Speaker #7: So we're identifying the customers right now. We have, of course, our supplier agreements in place. We have dealing with our equipment vendors. So that's going well.

Speaker #7: And what I really like in that side as well is that we are going to build an R&D center, which is not only, let's say, providing capacity for our customers, but also being very close with them on new R&D developers.

Edwin Roks: What I really like in that, in that site as well is that we are going to build an R&D center, which is not only, let's say, providing capacity for our customers, but also being very close with them on new R&D developers.

Speaker #6: Great. That's helpful. And as a quick follow-up, can you give us your latest thinking around the impact of higher oil prices on laminate costs and how that flows through your income statement in coming quarters?

Steven Fox: Great. That's helpful. As a quick follow-up, can you give us your latest thinking around the impact of higher oil prices on laminate costs and how that flows through your income statement in coming quarters? Thanks.

Speaker #6: Thanks.

Speaker #8: Yeah, Steve. So, hey, it's Sean Hannon here. So we did have some conversations within the company here and what we're observing within our supply chain and suppliers.

Sean Hannan: Yeah, Steve. Hey, it's Sean Hannan here. We did have some conversations within the company here and what we're observing within our supply chain and suppliers. We are observing, you know, some pressure in the supply chain environment, as is the rest of the industry. That can relate certainly to lead times and to pricing, but we don't think it's restricting our ability to reach our goals. In terms of a derivative specifically due to oil pricing, that's not something that we're currently observing through our questions.

Speaker #8: We are observing the supply chain environment as is the rest of the industry. And that can relate certainly to lead times and to pricing.

Speaker #8: But we don't think it's restricting our ability to reach our goals. In terms of a derivative specifically due to oil pricing, that's not something that we're currently observing through our questions.

Speaker #6: Great, thanks very much. And congrats on the great quarter.

Steven Fox: Great. Thanks very much, and congrats on the great quarter.

Speaker #7: Thank you, Steve. Thanks, Steve.

Sean Hannan: Thank you, Steven. Thanks, Steven.

Speaker #1: One moment for our next question. And that will come from the line of Jim Rashuti with Needham & Co. Your line is open.

Operator: One moment for our next question. That will come from the line of Jim Ricchiuti with Needham & Co. Your line is open.

Speaker #6: Hi, thanks. Good afternoon. I just wanted to focus on the growth you're seeing in the data center networking portion of the business. Is there a way for you to give us a sense of how much of that is volume-driven versus price?

Jim Ricchiuti: Hi. Thanks. Good afternoon. Just wanted to focus on the growth you're seeing in the data center networking portion of the business. You know, is there a way for you to give us a sense of how much of that is volume driven versus price? When I say price, I guess there are two components to that, right? They're the higher ASPs for the more complex boards and maybe just higher pricing in general. I'm just wondering if you can maybe drill down a little bit more on that.

Speaker #6: And when I say price, I guess there are two components to that, right? There are the higher ASPs for the more complex boards, and maybe just higher pricing in general.

Speaker #6: So I'm just wondering if you can maybe drill down a little bit more on that.

Speaker #7: Yeah, Jim. Happy to do that. And again, good to meet you again. First of all, I think if we think before we get to the ASP and the volume aspects, let's go back to the visibility first.

Edwin Roks: Yeah, Jim. This is Edwin. Happy to do that. Again, good to meet you again. First of all, I think, before we get to the ASP and the volume aspects, let's go back to the visibility first. I think our visibility is still, let's say, for normal order, still within the quarter. As you know, we are doing some larger order for larger players here, where we have a visibility of, let's say, 1 year. We still have our strategic alliance with these top customers. These are, let's say, in the multi-year regime. That is, let's say, the whole point with respect to complexity. These boards are getting more and more complex. We spoke in the past about the number of layers.

Speaker #7: I think our visibility is still, let's say, for normal orders still within the quarter. As you know, we are doing some larger order for larger players here, where we have a visibility of, let's say, a year.

Speaker #7: And we still have our strategic alliance with these top customers. And these are, let's say, in the multi-year regime. That is, let's say, the whole point with respect to complexity.

Speaker #7: These boards are getting more and more complex. We spoke in the past about the number of layers. We can go to 80 layers. We can have 100 layers, even 140 layers.

Edwin Roks: You know, we can go to 80 layers, we get 100 layers, even 140 layers now, which is really the sum. Of course, we have these asymmetrical panels as well, where we distinct the power from the signals. That's going very, very well. Because of that complexity, our ASPs are going up, let's say, a factor of 4, maybe a factor of 8. I hate to talk about ASP because it's basically the complexity. It's basically the complexity what's going on. The volume aspect of it, yes, there is more volume. There are more panels. Also, if you look at volume, if you want to create a more complex panel, you need more cycles in the facility to build that panel. That's also a volume aspect.

Speaker #7: Which is really the summer. And then, of course, we have these asymmetrical panels as well, where we distinct the power from the signals. So that's going very, very well because of that complexity.

Speaker #7: Our ASPs are going up, let's say, a factor four, maybe a factor eight. But I hate to talk about ASP because it's basically the complexity.

Speaker #7: It's basically the complexity what's going on. Then the volume aspect of it. Yes, there is more volume. There are more panels. But also, if you look at volume, if you want to create a more complex panel, you need more cycles in the facility to build that panel.

Speaker #7: That's also a volume aspect. So if you let's say, bottom line, bottom line, if you look at ASP versus volume, yeah, it's mostly ASP.

Edwin Roks: If you, let's say bottom line, if you look at ASP versus volume, yeah, it is mostly ASP, but it still has a big effect on the facility because complex panels require more cycles in the facility. Hopefully that answers your question.

Speaker #7: But it still has a big effect on the facility because complex panels require more cycles in the facility. Hopefully, that answers your question.

Jim Ricchiuti: It does help. Maybe 1 quick follow-up. I wonder if you can give us an update on how the ramp is going in Penang. Dan, maybe if you can give us some sense as to what kind of a headwind it might have represented in the quarter and how you see that unfolding in Q2 and in H2. Thank you.

Speaker #6: It does help. And maybe one quick follow-up: I'm wondering if you can give us an update on how the ramp is going in Penang.

Speaker #6: And then maybe, if you can, give us some sense as to what kind of headwind it might have represented in the quarter, and how you see that unfolding in Q2 and the second half.

Speaker #6: Thank you.

Edwin Roks: Yeah, Penang. Absolutely. I'm very happy with the performance of Penang. Yields, let's say, are improving a lot. If I look at these anchor customers and I pick one of them, then we are seeing yields, let's say in the past we saw yields above 40% last quarter. Now we are seeing it closer to 70% and 80%. That's going very well. In the past, I would say a year ago, we disclosed some of the break-even numbers. I can tell you, we were getting very close to that number. I would be very surprised, let's say, if Q4, and hopefully earlier, we are in a break-even situation for Penang. That's going well.

Speaker #7: Yeah. Yeah, yeah. Penang. Absolutely. I'm very happy with the performance of Penang. Yields, let's say, are improving a lot. If I look at these anchor customers and I pick one of them, then we are seeing yields let's say in the past, we saw yields above 40% last quarter.

Speaker #7: Now we are seeing it closer to 70% and 80%, so that's going very well. In the past—I would say about a year ago—we disclosed some of the break-even numbers.

Speaker #7: I can tell you we were getting very close to that number. So I would be very surprised, let's say, if Q4 and hopefully earlier we are in a break-even situation for Penang.

Speaker #7: So that's going well. We spoke about the headwinds of 160 basis points bringing that back. So let's say in half to 80 basis points headwind for the full year.

Edwin Roks: We spoke about the headwinds of 160 basis points. Bringing that back from, let's say in half, to 80 basis points headwind for the full year. We're still on track there. Again, we hope to do better. Again, we changed the team. I was there myself, by the way, a few weeks ago. It is going very smooth. It's a highly automated facility. Yeah, I'm very positive, Jim, about that situation there.

Speaker #7: We're still on track there. And again, we hope to do better. So again, we changed the team. I was there myself. By the way, a few weeks ago, it is going very smooth.

Speaker #7: It's a highly automated facility. So yeah, I'm very positive about that situation there.

Jim Ricchiuti: Edwin, just to clarify, when you say an anchor customer, is that an anchor customer in the data center networking area?

Speaker #6: Edwin, just to clarify, when you say anchor customer, is that an anchor customer in the data center networking area or? Okay. Thank you. Thank you.

Edwin Roks: Yes.

Jim Ricchiuti: Okay. Thank you. Thank you.

Edwin Roks: It is. It is. In that facility, we also do a lot of medical industrial instrumentation business. In this case, I was talking about one of the data center networking players. Yeah.

Speaker #7: It is. But that facility, we also do a lot of medical and industrial instrumentation business. But in this case, I was talking about one of the data center networking players.

Speaker #7: Yeah.

Jim Ricchiuti: Great. Thank you.

Speaker #6: Great. Thank you.

Speaker #1: Thank you. One moment for our next question. And that will come from the line of William Stein with Truist Securities. Your line is open.

Operator: Thank you. One moment for our next question. That will come from the line of William Stein with Truist Securities. Your line is open.

William Stein: Great. Congrats on the great results and outlook, and thanks for taking my questions. First, I wanna ask something about data center networking. Can you help us understand your size in that market relative to the market overall? Because most of this market really is served out of Asia. I think there are many investors here in the US who might not appreciate that you may not be the biggest. It highlights the potential for significant growth, you know, maybe almost you can take whatever you can build to. Can you maybe characterize that? Then the other question I had was about the exposure or concentration in that end market relative to the various GPU or TPU-type customers and their the other hyperscaler customers.

Speaker #6: Great. Congrats on the great results and outlook. And thanks for taking my questions. First, I want to ask something about data center networking. Can you help us understand the your size in that market relative to the market overall?

Speaker #6: Because most of this market really is served out of Asia. I think there are many investors here in the US who might not appreciate that you may not be the biggest.

Speaker #6: And so it highlights the potential for significant growth maybe almost you can take whatever you can build to. Can you maybe characterize that and then the other question I had was about the exposure or concentration in that end market relative to the various GPU or TPU-type customers and their other hyperscaler customers?

Speaker #6: Maybe talk about the dispersion of or the customer concentration. Thank you.

William Stein: Maybe talk about the dispersion of or the customer concentration. Thank you.

Speaker #7: Yeah. Thank you, Will. These are really good questions. So first of all, your first question, if you look at the size of the market, that's always a big that's always a bit difficult to define correctly.

Edwin Roks: Yeah. Thank you, Will. These are really good questions. First of all, your first question, if you look at the size of the market, that's always a bit difficult to define, correct? It's the spend, let's say, in all these data centers, about 75% of it is still in hardware, which I really like. It's the energy component, and it's basically what we do, is the interconnect. Yeah, we are the nervous system, as you know, of all these interconnect, putting all these chips together. The market overall is a bit difficult to define in that sense, I can tell you, we play in the high end of that market.

Speaker #7: It's the spend, let's say, in all these data centers, about 75% of it is still in hardware, which I really like. It's the energy component, and it's basically what we do is the interconnect, yeah?

Speaker #7: We are the nervous system, as you know, of all these interconnect, all these putting all these chips together. The market overall is a bit difficult to define in that sense.

Speaker #7: But I can tell you, we play in the high end of that market. So everything that has to do with, let's say, more than 40 layers—and like I said in the previous question, this can go up to 140 layers.

Edwin Roks: Everything what has to do with, let's say, more than 40 layers, and like I said in the previous question, this can go up to 140 layers. High complexity, very small pitch. That's where we play in. If I look at our competition, so thinking about Victory Giant, thinking about WUS, and Unimicron and others, let's say we are in that top 4. There is a lot of demand, and we are in that top 4. Some of the, let's say, innovations we did, let's say I'm talking about n plus m, which is, for instance, the asymmetrical boards, where power is on one side of the board and signal on the other side of the board.

Speaker #7: High complexity, very small pitch. That's where we competition, so thinking about Victory Giant, thinking about Wuz, and Unimicron and others, let's say we are in that top four.

Speaker #7: There is a lot of demand. And we are in that top four. Some of the, let's say, innovations, some of the innovations we did, let's say I'm talking about M plus M, which is, for instance, the asymmetrical boards where power is on one side of the board and signal on the other side of the board.

Edwin Roks: We basically transferred some of that IP to our competition to be able to make sure that we can supply as a whole business. The whole landscape is, let's say 5, 6 players, where we are in the top 4. That's about the situation. Of course, we have a pretty unique situation here. We are a US player. That also means that we are very flexible with our location with respect to what the customer wants. Yeah, if you want the process in China, we do that. We have 5 facilities in China. We have a facility in Malaysia, if you want China plus one. If these customers want to be in the US, we have 16, 17 sites in the US supporting this.

Speaker #7: We basically transferred some of that IP to our competition to be able to make sure that we can supply as a whole business. So the whole landscape is, let's say, five or six players where we are in the top four.

Speaker #7: That's about the situation. Of course, we have a pretty unique situation here. We are a U.S. player. That also means that we are very flexible with our location, with respect to what the customer wants.

Speaker #7: If you want a process in China, we do that. We have five facilities in China. We have a facility in Malaysia. If you want China plus one.

Speaker #7: But if these customers want to be in the US, we have 16, 17 sites in the US. Supporting this. So that's basically what's happening.

Edwin Roks: That's basically what's happening. Related to your second question regarding GPU, TPU, XPU, whatever you want it to be U, I can tell you we're agnostic. We're agnostic for that particular situation. Even if it goes to quantum processing, QPUs, yeah, there is a lot of conventional processing required after quantum. There is always a need for these boards. These boards, for whatever customer, are very, very, very similar, and the complexity is very similar. I'm so happy to say that we are very agnostic for that situation. Hopefully, that answers your question, Will.

Speaker #7: Then, related to your second question regarding GPU, TPU, XPU—whatever you want, the 'PU'—I can tell you we're agnostic. We're agnostic for that particular situation.

Speaker #7: Even if it goes to quantum processing, QPUs, there is a lot of conventional processing required after quantum. So there is always a need for these boards.

Speaker #7: These boards, for whatever customer, are very, very, very similar. And the complexity is very similar. So I'm so happy to say that we are very agnostic for that situation.

Speaker #7: Hopefully, that answers your question, Will.

Speaker #6: Thank you.

William Stein: Thank you.

Speaker #1: Thank you. One moment for our next question. That will come from the line of Mike Crawford with B Riley Securities. Your line is open.

Operator: Thank you. One moment for our next question.

Operator: That will come from the line of Mike Crawford with B. Riley Securities. Your line is open.

Speaker #6: Thank you. Within your aerospace and transport, how much was commercial? How much was space? And where would you expect to see space in the future, especially as compute migrates to Leo Geo, Cislunar, or even Moon-based space?

Mike Crawford: Thank you. Within your Aerospace and Defense vertical, how much was commercial? How much was space? Where would you expect to see space in the future, especially as compute migrates to LEO, GEO, cislunar or even moon-based space?

Speaker #7: Yeah, Mark. That's a very clear question. If you look at the aerospace and defense, and by the way, you probably saw in the earnings that we did move our commercial space business from our commercial group to the aerospace and defense group.

Edwin Roks: Yeah, Mike, that's a very clear question. If you look at the Aerospace and Defense, by the way, you probably saw in the earnings that we did move our commercial space business from our commercial group to the Aerospace and Defense group. We did that for a reason, because there is a lot of synergy between these businesses, and it's much easier to put it in one business. That's what we did. If you look at, let's say, Aerospace and Defense, the breakdown is about 50% of the Aerospace and Defense business, and that can be printed circuit boards. It can also be up the chain, what we call up the chain, let's say all kinds of modules or subsystems or systems.

Speaker #7: And we did that for a reason because there is a lot of synergy between these businesses. And it's much easier to put it in one business.

Speaker #7: So that's what we did. If you look at, let's say, aerospace and defense, the breakdown is about 50% of the aerospace and defense business.

Speaker #7: And that can be printed circuit boards. It can also be up to chain, what we call up to chain, let's say, all kinds of modules or subsystems or systems.

Speaker #7: It's about 50% radar-related. Then we have about, let's say, 25% communication, mostly communication-related, some guidance systems, these type of things. Below the smaller fraction here is below 10% is munitions.

Edwin Roks: It's about 50% radar related. We have about, let's say, 25% communication, mostly communication related, some guidance systems, these type of things. Below, the smaller fraction here is below 10% is munitions. That's, by the way, that's where I expect a lot of upside in the coming period. Five percent, only 5% currently, 5% of our business is space. I agree with you, there's a lot of room to maneuver. There's a lot of potential, especially with our radiation hard designs and all the other things we do. Space is absolutely an area, a focus area, but currently it's only 5% of our business.

Speaker #7: That's, by the way, that's where I expect a lot of upside in the coming period. And then 5%, only 5% currently, 5% of our business is space.

Speaker #7: And I agree with you, there is a lot of room to maneuver. There is a lot of potential, especially with our radiation-hard designs and all the other things we do.

Speaker #7: So space is absolutely an area focus area. But currently, it's only 5% of our business.

Mike Crawford: Okay. Thank you, Edwin. Switching gears, CapEx was high at $107 million in Q1. Can you just provide any updated thoughts on where that might fall out this year and next? That's assuming that you are not only ramping in China and Malaysia and Syracuse, but also Euclid.

Speaker #6: Okay. Thank you. And when you then switching gears, CapEx x was high, 107 million Q1. Can you just provide any updated thoughts on where that might fall out this year and next?

Speaker #6: And that's assuming that you aren't not only ramping in China and Malaysia and Syracuse, but also Euclid?

Daniel Boehle: Yeah, Mike, I'll take that question. You know, you'll see our, in our Form 10-Q when it comes out, we disclose the CapEx forecast for the year. It was originally about $250 million, $240 to 260 million. We're increasing that to $300 to 320 million is the range that we're currently looking at. We've accelerated some of the capital expenditures that we talked about for Asia. You know, as some of the lead times on equipment, we're starting to get indications that those would start stretching out. We got our orders in early. We're starting to really get some of that equipment in a little bit quicker.

Speaker #7: Yeah, Mike, I'll take that question. So you'll see in our 10Q when it comes out, we disclose the CapEx forecast for the year. It was originally about 250 million, 240 to 260.

Speaker #7: We're increasing that to 300 to 320 is the range that we're currently looking at. So we've accelerated some of the capital expenditures that we talked about for Asia.

Speaker #7: As some of the lead times on equipment, we're starting to get indications that those would start stretching out. So we got our orders in early.

Speaker #7: We were starting to really get some of that equipment in a little bit quicker. We've had to pay deposits for that. So that's why the cash expenditures have been up a little bit higher.

Daniel Boehle: We've had to pay, you know, deposits for that, so that's why the cash expenditures have been up a little bit higher. As you can see in our numbers, it's also generated fast revenue for us. We've accelerated some of that $200 to 300 million of CapEx that I said we were gonna spend in expanding Asia.

Speaker #7: But as you can see in our numbers, it's also generated fast revenue for us. So we've accelerated some of that 2 to 3 hundred million dollars of CapEx that I said we were going to spend in expanding Asia.

Speaker #6: Excellent. Thank you.

Mike Crawford: Excellent. Thank you.

Speaker #1: Thank you. One moment for our next question. And that will come from the line of Ruben Roy with Stifel. Your line is open.

Operator: Thank you. One moment for our next question. That will come from the line of Ruben Roy with Stifel. Your line is open.

Speaker #8: Hi, guys. Excuse me, this is Sad saying on for Ruben. Look, yesterday, one of the major EMS guys reported, and they made mention of challenges in 40-plus layer PCBs and sort of sourcing them.

Thad: Hi, guys. This is, excuse me. This is Thad sitting on for Ruben.

[Analyst] (Stifel): Hi, guys. This is, excuse me. This is Thad sitting on for Ruben.

Edwin Roks: Great.

Thad: Yesterday, you know, one of the major EMS guys reported, and they made mention of challenges in 40-plus layer PCBs and sort of sourcing them. You know, we've already talked about price leverage. Sounds like you have that, Edwin. You know, correct me if I'm wrong, I think I heard you say 8x on that. We're talking about volumes via the accelerated CapEx ramp, which sounds perhaps tied to the anchor customer. Maybe we look at perhaps the contract structures themselves and, you know, the length of contracts. You know, the update into 2027 we got earlier this year was healthy and great.

[Analyst] (Stifel): Yesterday, you know, one of the major EMS guys reported, and they made mention of challenges in 40-plus layer PCBs and sort of sourcing them. You know, we've already talked about price leverage. Sounds like you have that, Edwin. You know, correct me if I'm wrong, I think I heard you say 8x on that. We're talking about volumes via the accelerated CapEx ramp, which sounds perhaps tied to the anchor customer. Maybe we look at perhaps the contract structures themselves and, you know, the length of contracts. You know, the update into 2027 we got earlier this year was healthy and great.

Speaker #8: We've already talked about price leverage sounds like you have that, Edwin, correct me if I'm wrong. I think I heard you say 8X on that.

Speaker #8: We're talking about volumes via the accelerated CapEx ramp, which sounds perhaps tied to the anchor customer. Maybe we look at perhaps the contract structures themselves and the length of contracts, the update into 27.

Speaker #8: What we got earlier this year was healthy and great. And I'm curious if you're seeing contract structures extend out as we're seeing with some of these other rack-scale inputs.

Thad: You know, curious if you're seeing contract structures extend out as we're seeing with some of these other, you know, rack scale inputs, and what that looks like in terms of securitizing supply with you being the supplier over a multi-year period, particularly as you're investing on an accelerated cadence into CapEx.

[Analyst] (Stifel): You know, curious if you're seeing contract structures extend out as we're seeing with some of these other, you know, rack scale inputs, and what that looks like in terms of securitizing supply with you being the supplier over a multi-year period, particularly as you're investing on an accelerated cadence into CapEx.

Speaker #8: And what that looks like in terms of securitizing supply with you being the supplier over a multi-year period, particularly as you're investing on an accelerated cadence, into CapEx.

Edwin Roks: Yeah, that's a good question. Thank you. Thank you very much for the question. Yeah, if you look at contracts, it works a bit different here. I think it's all with these hyperscalers and data center and networking customers. It's about very tight relations. We have very tight relations. That basically means we have a lot of alignment on roadmaps, on future. How do you think about, let's say, multi-layers, or you think about zero stub, which is basically making sure there is no antenna function in these boards. You can imagine that everything becomes more and more complex, so you get a lot of antenna functionality in that thing which you don't want.

Speaker #7: Yeah, that's a good question. Thank you very much for the question. Yeah, if you look at contracts, it works a bit different here. I think it's all with these hyperscalers and data center and networking customers.

Speaker #7: It's about very tight relations. We have very, very tight relations. That basically means we have a lot of alignment on roadmaps, on future. Either you think about, let's say, multi-layers or you think about zero stop, which is basically making sure there is no antenna function in these boards.

Speaker #7: You can imagine that everything becomes more and more complex. So you get a lot of antenna functionality in that thing, which you don't want.

Speaker #7: So zero stop is a new thing there. We spoke already about the N+M where the power and the signal are separated. There's a lot of, let's say, material science in our boards, which makes sure that signal integrity becomes at the highest point.

Edwin Roks: Zero stub is a new thing there. We spoke already about the N+M, where the power and the signal are separated. There's a lot of, let's say, material science in our boards which makes sure that signal integrity becomes at the highest point. I think that's the key things for these customers. You need to be the technology leader. You cannot be a follower here. The other thing is, of course, you need to have the capacity and the flexibility, and that's what we provide, let's say, being in China, being in China plus one, in our case, Malaysia, and being in the US and hopefully soon in Europe. That's basically where we are, and that's basically tied in that relation with the customers.

Speaker #7: I think that's the key things for these customers. You need to be the technology leader. You cannot be a follower here. And then the other thing is, of course, you need to have the capacity.

Speaker #7: And the flexibility. And that's what we provide—let's say, being in China, being in China plus one, in our case Malaysia, and being in the US, and hopefully soon in Europe.

Speaker #7: So that's basically where we are and that's basically tied in that relation with the customers. The other side is, let's say, the suppliers. They have the same thing.

Edwin Roks: The other side is, let's say, the suppliers. They have the same thing. We have strategic alliances with all the critical components. Yes, of course, we have contracts in place, but if you have to rely on that contract, you're just too late. Yeah. It's always a matter of, let's say, relation and making sure you're very relevant for that supplier, you're very relevant for your customer. That would be my answer here.

Speaker #7: We have strategic alliances, with all the critical components. And yes, of course, we have contracts in place. But if you have to rely on that contract, you're just too late.

Speaker #7: Yeah. It's always a matter of, let's say, relation and making sure you're very relevant for that supplier. You're very relevant for your customer. So that would be my answer here.

Daniel Boehle: By the way, just to add to Edwin's answer. Coming back to part of the question, to clarify, within data center and networking, we don't have just an anchor customer. I think there was a reference to an anchor customer specific to a facility being Penang earlier in the conversation. We have about 10 very major customers within that segment. Only one is a 10 percenter right now, we're playing with 10 substantial names.

Speaker #7: By the way, just to add to Edwin's answer, so and also coming back to part of the question, so to clarify within data center and networking, we don't have just A anchor customer.

Speaker #7: I think there was a reference to an anchor customer specific to a facility being Penang earlier in the conversation. But we have about 10 very major customers within that segment.

Speaker #7: Only one is a 10% right now, but we're playing with 10 substantial names.

Thad: Okay, that's great. That was actually gonna be a follow-up, particularly to Daniel, because of your CapEx commentary. I think, last quarter, you as you mentioned, were pointing to $250 million at the midpoint, and this quarter it sounds like $310, and you're still talking about FY 2027 going up. You're, you're talking about an incremental $120 million or so relative to at least what was signaled last quarter. Just if you can point to any sort of puts and takes on the pace at which you might recognize these ramps. I don't know if you're ready to make those types of disclosures. I understand if you're not, and if you're not, the question on A&D would be, you know, you're pointing to munitions in space.

Speaker #8: Okay, that's great. That was actually going to be a follow-up, particularly to Daniel because of your CapEx commentary. I think last quarter you, as you mentioned, were pointing to $250 million at the midpoint, and this quarter it sounds like $310 million, and you're still talking about FY27 going up.

[Analyst] (Stifel): Okay, that's great. That was actually gonna be a follow-up, particularly to Daniel, because of your CapEx commentary. I think, last quarter, you as you mentioned, were pointing to $250 million at the midpoint, and this quarter it sounds like $310, and you're still talking about FY 2027 going up. You're, you're talking about an incremental $120 million or so relative to at least what was signaled last quarter. Just if you can point to any sort of puts and takes on the pace at which you might recognize these ramps. I don't know if you're ready to make those types of disclosures. I understand if you're not, and if you're not, the question on A&D would be, you know, you're pointing to munitions in space.

Speaker #8: So you're talking about an incremental 100 to 20 or so million relative to at least what was signaled last quarter. If you can point to any sort of puts and takes on the pace at which you might recognize these ramps, I don't know if you're ready to make those types of disclosures.

Speaker #8: I understand if you're not. And if you're not, the question on A&D would be you're pointing to munitions and space. Similar sort of question on contract structure.

Thad: Similar sort of question on contract structure. Are these procurement-based contracts whereby margins are fixed, or are these fixed firm price whereby, you know, there's potential for margin accretion? I'll stop there.

[Analyst] (Stifel): Similar sort of question on contract structure. Are these procurement-based contracts whereby margins are fixed, or are these fixed firm price whereby, you know, there's potential for margin accretion? I'll stop there.

Speaker #8: Are these procurement-based contracts where buy margins are fixed? Are these fixed firm price whereby there's potential for margin accretion? And I'll stop there.

Daniel Boehle: Yeah. There's a lot. I guess I'll first address your capital expenditure. I'm not gonna go beyond what I just said about this year, as you mentioned. You know, our capital expenditures from this year is going up from, yeah, centered on $250 to now centered on $310, the range is from $300 to $320. And that's to continue to stay at pace with the demand that we are experience from our customers in the data center area. I'll maybe pass it over to you to answer the other question.

Speaker #7: Okay. I guess I'll first address your capital expenditure. So I'm not going to go beyond what I just said about this year, as you mentioned, so our capital expenditures from this year is going up from, yeah, centered on 250 to now centered on 310.

Speaker #7: So, the range is from 300 to 320, and so that's accelerated a little bit of what we had previously talked about over the next two years.

Speaker #7: And that's to continue to stay at pace with the demand that we are experiencing from our customers in the data center area. So I'll maybe pass it over to you to answer the other question.

Speaker #8: Yeah. So repeat the.

Edwin Roks: Sure. Repeat the question.

Daniel Boehle: Sorry. Do you wanna repeat that second one? We got A&D, that comment earlier.

Speaker #7: Sorry. Do you want to repeat that second one? We got A&D coming earlier.

Thad: On A&D, as far as you know, you're talking to munitions and space, and it sounds like, Edwin, you're saying munitions might be the upside more near term.

[Analyst] (Stifel): On A&D, as far as you know, you're talking to munitions and space, and it sounds like, Edwin, you're saying munitions might be the upside more near term.

Speaker #8: On A&D as far as you're talking to munitions and space, and it sounds like, Edwin, you're saying munitions might be the upside more near term.

Edwin Roks: Yeah.

Thad: With space being the longer tailed upside.

[Analyst] (Stifel): With space being the longer tailed upside.

Speaker #8: With space being a longer-tailed upside.

Speaker #7: Yeah, absolutely. By the way, we see strong demand in general, let's say, in our airspace and defense business. And for the obvious reasons, of course, but on the munitions side, yeah, if you read the newspapers, there's the supply becomes more and more important and we see that.

Edwin Roks: Absolutely. By the way, we see strong demand in general, I'd say, in our aerospace and defense business and for the obvious reasons, of course. On the munitions side, yeah, if you read the newspapers, there's, you know, the supply becomes more and more important, and we see that. We are long lead time items, the basically the primes already coming to us, let's say, with respect to, Hey, what can you do additionally for on the munitions side? That's, for us, it's more of the same. We already do that. That's a very good thing. Yeah, that's the answer.

Speaker #7: We are long lead time items. So the basically the primes are already coming to us, let's say, with respect to, "Hey, what can you do additionally for on the munitions side?" And that's for us, it's more of the same.

Speaker #7: We already do that, so that's a very, very good thing. So, yeah, that's the answer.

Speaker #9: 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. Edwin Rocks for any closing remarks.

Operator: 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. Edwin Roks for any closing remarks.

Speaker #7: Yeah. Thank you, Saree. Now I'd like to close by summarizing three key items: first, we are experiencing high healthy growth. We delivered strong sales growth in Q1 of 30% year on year, resulting in an all-time high for quarterly revenue.

Edwin Roks: Yeah. Thank you, Cherie. Now I'd like to close by summarizing three key items. First, we are experiencing healthy growth. We delivered strong sales growth in Q1 of 30% year on year, resulting in an all-time high for quarterly revenue, driven by increases in our data center and networking, medical, industrial, and instrumentation in Aerospace and Defense end markets. Secondly, our Adjusted EBITDA for the Q1 of 15.7% is reflected strong operating performance, leading to another all-time high record, a quarterly non-GAAP EPS results of $0.75 per diluted share. Third, we continue to generate solid cash flows from operations, which enables us to invest in our projected continued growth while maintaining a healthy net leverage ratio of about 1.

Speaker #7: Driven by increases in our data center and networking, medical, industrial, and instrumentation and aerospace and defense end markets. Secondly, our adjusted EBITDA for the first quarter of 15.7% reflected strong operating performance leading to another all-time high record at quarterly non-GAAP EPS results of 75 cents per diluted share.

Speaker #7: And third, we continue to generate solid cash flows from operation, which enables us to invest in our projected continued growth while maintaining a healthy net leverage ratio of about 1.

Edwin Roks: In closing, I would like to thank all the employees of TTM, our customers, our suppliers, and our shareholders for your continued support. Thank you very much, and goodbye.

Speaker #7: In closing, I would like to thank all the employees of TTM, our customers, our suppliers, and our shareholders for your continued support. Thank you very much and goodbye.

Operator: This concludes today's program. Thank you all for participating. You may now disconnect.

Q1 2026 TTM Technologies Inc Earnings Call

Request DemoDemo

TTM Technologies

Earnings