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TTM (TTMI) Q3 Earnings call transcript Oct 30, 2024

Daily EarningsThursday, Oct 31, 2024 3:59 pm ET

2min read

TTMI --

TTM Technologies, a leading global provider of advanced technology products and services, recently held its third quarter 2024 earnings call, offering insights into the company's financial health and strategic initiatives. Amidst a backdrop of market volatility and ongoing challenges, TTM Technologies presented a picture of resilience and strategic foresight.

Financial Highlights

TTM Technologies reported a solid third quarter, with revenues above the midpoint of the guided range, marking the third consecutive quarter of year-on-year growth. This growth was primarily driven by demand strength from the aerospace and defense and data center computing end markets. The company's aerospace and defense market, which accounted for 46% of total sales, continued to show strong demand, driven by strategic program alignment and key bookings for ongoing franchise programs. This market segment saw a record program backlog of approximately $1.49 billion, underscoring the company's strategic focus and market positioning.

The data center computing end market also contributed significantly to TTM Technologies' growth, driven by the increasing demand for Generative AI applications. This end market saw a 20% year-on-year growth, with revenues expected to represent 21% of fourth quarter sales. However, the medical, industrial, instrumentation, and automotive end markets saw declines, primarily due to lower demand and ongoing inventory normalization.

Strategic Initiatives

TTM Technologies' strategic focus on value addition and differentiation was evident in the call, with the company highlighting its strategic acquisitions in the aerospace and defense end market. Over 50% of TTM's revenues in aerospace and defense are now generated from engineered and integrated electronic products, signaling a shift away from traditional printed circuit boards. The company's investment in a new state-of-the-art PCB manufacturing facility in Penang, Malaysia, is expected to support customers in data center computing, networking, medical industrial, and instrumentation end markets, further diversifying its product offerings and customer base.

Operational Efficiency and Consolidation

TTM Technologies also highlighted its efforts towards operational efficiency and consolidation, with plans to close 3 small printed circuit board manufacturing facilities and consolidate 2 smaller non-PCB integrated electronics facilities. These moves are aimed at improving total plant utilization, operational performance, customer focus, and profitability. The company also announced plans to expand its advanced technology capability for the aerospace and defense market through the construction of a new facility in Syracuse, New York. This facility, expected to be operational by 2026, will focus on specialized high technology printed circuit board production, providing customers with reduced lead times and increased domestic capacity for Ultra HDI PCBs.

Financial Performance and Outlook

The company's financial performance was robust, with GAAP operating income for the third quarter of 2024 at $51 million, a significant improvement from the $10.2 million operating loss in the third quarter of 2023. This was driven by higher sales volume, particularly in the aerospace and defense and data center computing end markets, and improved operational execution. TTM Technologies also reported a net sales increase of 10% year-on-year, underscoring its strategic focus and execution capabilities.

Looking ahead, TTM Technologies projected net sales for the fourth quarter of 2024 to be in the range of $610 million to $650 million, with non-GAAP earnings expected to be in the range of $0.44 to $0.50 for diluted share. The company expects SG&A expense to be about 9.5% of net sales and R&D to be about 1.3% of net sales in the fourth quarter.

Challenges and Opportunities

The earnings call highlighted both challenges and opportunities for TTM Technologies. The company faces ongoing challenges in the automotive end market, which remains challenged in the near-term due to inventory adjustments and soft demand at several customers. However, the company is optimistic about the potential of its advanced technology and engineered products capabilities, particularly in the aerospace and defense and data center computing end markets. The company's strategic focus on value addition, differentiation, and operational efficiency positions it well for future growth.

Conclusion

TTM Technologies' third quarter 2024 earnings call offered a comprehensive overview of the company's financial performance, strategic initiatives, and market positioning. Amidst ongoing market challenges and volatility, TTM Technologies demonstrated resilience and strategic foresight, highlighting its focus on value addition, operational efficiency, and market diversification. With a solid financial performance, strategic initiatives, and a positive outlook, TTM Technologies is well-positioned to navigate the evolving market landscape and capitalize on growth opportunities.

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