TTM Technologies, Inc. (TTMI) Earnings

Management highlights

- Core Strategic Priorities - TTM focuses on designing and manufacturing advanced interconnect products and printed circuit boards (PCBs), plus up-the-chain integrated solutions including RF modules, subsystems, and mission systems, with innovation focused on next-generation size, weight, and power (SWAP) requirements. - 80% of net sales are tied to the AI and defense megatrends, which management expects to remain strong long-term growth drivers. - The company pursues thoughtful capital investments and strategic acquisitions to add complementary capabilities, products, and geographic reach. - Operational Progress & Milestones - Early production ramps for N+M (asymmetrical interconnect PCBs) for AI data center customers have begun, with yields performing better than expected. Volume ramp-up for Ultra HDI products at the new Syracuse facility will start in Q3 2026, continuing through 2027 to reach full capacity in late 2028. - The Penang facility is on track to reach break-even revenue by late Q3/Q4 2026; it primarily serves the MI&I segment, and has already begun producing N+M products for data center customers. - The Wisconsin (Eau Claire) facility development is progressing as planned, with no hurry to ramp; the site will primarily host an innovation center for new technologies, positioned close to key defense customers, with no near-term material capital burden. - A&D segment initiatives to improve pricing structures, streamline supply chains, and drive manufacturing efficiencies are on track, expected to deliver long-term margin improvements. - TTM has announced two pending acquisitions: privately held STG (Switzerland) and ILFA (Germany), expected to close in Q3 2026. The acquisitions will create TTM's initial European footprint, add long-cycle medical and A&D businesses that align with the company's up-the-chain value-add strategy, are expected to contribute less than 5% incremental sales, and be moderately accretive to adjusted EBITDA. - Q2 2026 Financial Highlights - The quarter delivered all-time quarterly records for net sales (first time hitting $1 billion) and non-GAAP EPS. Gross margin improved 100 bps YoY to 21.9%, and operating margin improved 270 bps YoY to 13.8%, driven by volume growth, favorable product mix, and SG&A expense discipline. Free cash flow was $46.0 million, up from $37.6 million YoY.

Guidance

- Third Quarter 2026 (excluding any contribution/impact from pending acquisitions): - Net sales are projected to be between $1.10 billion and $1.14 billion - Non-GAAP diluted EPS is projected to be between $1.21 and $1.27 - A&D is expected to represent 32% of total sales, with continued YoY and sequential growth - Data Center and Networking is expected to represent 49% of total sales as N+M volume ramping begins - MI&I is expected to represent 13% of total sales, with continued YoY and sequential growth - Automotive is expected to represent ~6% of total sales - Full Year 2026 (excluding any contribution/impact from pending acquisitions): - Management now expects full-year net sales of approximately $4.4 billion, an upward revision from the prior target of at least $4.0 billion - Non-GAAP diluted EPS is expected to approach $5.00, an upward revision from prior expectations - A&D full-year sales are expected to grow low to mid-teens YoY (maintained prior growth outlook) - Data Center and Networking full-year sales are now expected to more than double YoY, an upward revision - MI&I full-year sales are expected to grow 35% to 40% YoY - Automotive full-year sales are still expected to decline mid-single digits YoY, maintaining prior outlook - Long-term Guidance: - Management confirms prior guidance of 15% to 20% organic revenue growth for 2027 and 2028, and will provide updated long-term plan details next quarter

Segment performance

Overall company net sales for Q2 2026 hit $1.0 billion, a 37% year-over-year increase. GAAP operating income was $109.1 million, up from $61.8 million YoY. Non-GAAP diluted EPS was $0.99, a 71% YoY improvement, and adjusted EBITDA reached $166.8 million (16.6% margin, up 160 bps YoY). 1. Aerospace and Defense (A&D): Q2 2026 sales were $370 million, representing 37% of total net sales, with 14% YoY growth. The segment had a book-to-bill ratio of 1.3, and total program backlog grew to $1.7 billion from $1.5 billion YoY. Qualified business pipeline for the segment exceeds $7 billion, an all-time high. 2. Data Center and Networking: Q2 2026 sales were $400 million, representing 40% of total net sales, with 91% YoY growth driven by AI data center buildout demand. 3. Medical, Industrial, and Instrumentation (MI&I): Q2 2026 sales were $150 million, representing 15% of total net sales (note: the transcript contains an apparent typo stating 50%, which conflicts with total segment share adding to 100%), with 33% YoY growth. Performance of TTM's top 5 medical customers has more than doubled internal expectations, driven by strong demand for glucose monitoring products and automated test equipment for AI solutions. 4. Automotive: Q2 2026 sales were $80 million, representing 8% of total net sales, with a marginal YoY decrease. TTM remains selective in this segment, focusing only on high-value add products that meet margin targets.

Risks & headwinds

- Forward-looking statements are inherently uncertain, and actual results may differ materially from expectations due to risks and uncertainties disclosed in TTM's SEC filings. - CCL material suppliers are shifting production away from lower-complexity materials to higher-complexity products, creating supply availability pressure for lower-end automotive products. - The pending European acquisitions are subject to regulatory approval, with closing timing dependent on regulatory review. - N+M margin expansion depends on achieving projected yield improvements as volume ramps, which may occur slower than expected. - Unrealized mark-to-market losses on the cross-currency swap used to hedge the STG acquisition purchase price will continue to impact GAAP earnings until the deal closes.

Analyst Q&A

• Q: What is the expected revenue and margin impact of the N+M scale-up in Q3 2026? /

  A: TTM expects $600 million in total N+M revenue in the second half of 2026, with one-third of that volume coming in Q3 and two-thirds in Q4. Yields for early production are currently very strong, and margins will improve as yields increase through the ramp, with this already fully incorporated into published guidance.

• Q: How is the Penang facility progressing, and is it now serving data center customers? /

  A: The Penang facility is exactly on track to reach break-even revenue by late Q3 or Q4 2026, with yields for key customer products meeting expectations. While the facility primarily serves the MI&I segment, it is already producing N+M asymmetrical PCBs for data center and networking customers as planned.

• Q: What is the update on the A&D sales pipeline, and what capability trends is TTM seeing in this segment? /

  A: TTM's qualified A&D pipeline now exceeds $7 billion, an all-time high, with strong demand across PCBs for munitions, mixed PCB and up-the-chain integrated work for the Golden Dome program, and new communications applications. Management notes TTM is often the only domestic U.S. supplier for these programs, and the pending European acquisitions will support further international growth in the segment. Ultra HDI capacity expansion in Syracuse is progressing on schedule.

• Q: What is the supply chain outlook for high-end materials used in advanced PCBs for data center customers? /

  A: Material suppliers are shifting focus to higher-margin, high-end advanced materials, which aligns with TTM's own focus on higher-value products. Any supply chain constraints TTM has experienced are limited to lower-end portions of its business (such as lower-complexity automotive), and supply for high-end data center products remains sufficient.

• Q: Is the $1 billion projected 2027 N+M revenue figure correct, and are there use cases beyond data center? /

  A: N+M is a family of technologies, not just a single product, and it is suitable for customers across multiple end markets beyond data center and networking. The $1 billion 2027 revenue figure is in the expected ballpark, but TTM is still completing its bottom-up annual planning process and will release an official accurate figure once planning is finalized.