TTM Technologies, Inc. Q3 FY2025 earnings call

Strategic Foundation

• Believes future of electronics lies in speed, reliability, and integration; focuses on moving up value chain into complex modules and subsystems for key industries like aerospace, defense, data centers, etc.

Third Quarter Highlights

• Delivered excellent third quarter 2025, with sales growing 22% year-on-year; sales and non-GAAP EPS above high end of guided range for fourth quarter in a row.
• Aerospace and defense sales at 45% of total sales, better than expected due to pull forward of sales; book-to-bill increased to very close to 1, backlog steady at ~$1.46 billion.
• Data center computing and networking, medical, industrial, and instrumentation end markets saw sales growth related to AI; ~80% of total sales related to aerospace and defense and AI.
• Adjusted EBITDA margin 16.1%, non-GAAP EPS $0.67, cash flows from operations $141.8 million or 18.8% of sales.

Penang Progress

• Making progress with customer qualifications and training local workforce; third quarter sales $5 million, expected growth in fourth quarter; long-term plan for second production facility with timing aligned to customer demand.

Syracuse Facility

• Progress on Ultra-HDI PCB manufacturing facility in Syracuse, New York continues; equipment arriving, expected volume production in second half of 2026.

In the third quarter of 2025, the Aerospace and Defense segment recorded net sales of $336.8 million and segment operating income of $52.9 million, accounting for 45% of total sales. The Commercial segment had net sales of $408.9 million and segment operating income of $60 million, making up 54.3% of total sales. The RF and Specialty Components segment had net sales of $10.4 million and segment operating income of $3.1 million, representing 1.4% of total sales.

Fourth Quarter Guidance

• Projects net sales for fourth quarter 2025 to be in the range of $730 million to $770 million.
• Non-GAAP earnings expected to be in the range of $0.64 to $0.70 per diluted share, inclusive of operating costs associated with starting up Penang facility.
• Expect SG&A expense to be about 8.9% of net sales, R&D to be about 1% of net sales; interest expense ~$10.2 million, interest income ~$2.7 million; effective tax rate between 11% and 15%.

Risks

• Potential impact of tariffs, with possibility of indirect impact like overall end market demand weakness and economic slowdown, but not seen impacting key end markets currently.

Q: First off, Edwin, welcome. Best of luck to you. I wanted to start off just on the data center market. Can you talk about; 2 questions. One, how far out does your visibility extend into this market? And the follow-up really deals with the -- whether you have been able to bring on additional capacity to be able to satisfy the demand from your customers from your 2 main facilities in China?

A: Yes. Jim, first of all, thank you for your question, and thank you for your nice comments here, and good to meet you again. Yes, the visibility is pretty okay. I would say our visibility is between 6 to 9 months. And again, we are already dealing with the top players there. So it's going relatively smooth. And if I look at capacity, Jim, I think when we are in the middle of, let's say, of our strategic planning, we are sort of, let's say, over the coming years, we're good regarding capacity, both in North America and Asia Pacific; well balanced, by the way, between these 2 continents. So that's -- yes, that's what I want to mention here.

Q: And Penang, can you update us, maybe, Dan, you could take this one, just the margin headwind that you experienced in Penang and how you think about that in Q4 going forward?

A: Yes. So happy to update you about Penang. First of all, Penang remains a key part of our China Plus One strategy. And we're making very good progress there, I would say. Like Tom mentioned in the last quarter, we are very much focused now on yield before we start ramping up. We want to ramp steadily with our customers. So the good news, Jim, is that we have 5 customers lined up, and we are basically qualifying these customers before the end of the year, and that's still progressing very well. The training aspect is key. We're working a lot with local staff now. The training aspect is key. That we are still planning also for that second facility in Penang. So I will say I'm pleased with the progress over the last quarter. I know we were a bit optimistic in the past, but I think we should be okay going forward.

Q: Just more broadly, could you help characterize your PCB manufacturing capacity share globally in China and in the U.S.?

A: Yes, Mike, good question. First of all, in the U.S., we are still the #1 player. And globally, it's always a bit more tricky to mention it. But of course, we are typically a high-end player. But if you look at overall, I think we're about the #6 or 7 of the world. That's basically where we are. And if you -- concentrate on data center, it's about the #3 or 4 with some typical competition, but about the #3 or 4.

Q: And the follow-up is in Penang, I believe you're starting out with something like maybe 15 layer boards, but where are you moving to density in China for data center applications?

A: Yes. Yes, absolutely. You will not see us -- we still have, of course, capacity, let's say, below the 16 layers. But our focus is, let's say, beyond that, going to a lot of layers. One of our typical things happening right now is that we are demonstrating 87 layers. So this is going very, very rapidly. And also on the stack micro VS to be more -- better, higher resolution, let's say, we're making really, really good progress. So working with customers on different aspects of the road map, be it more on the material side, be it more like asymmetrical designs like in PCBs, where you put the power on one side and the signal on the other side or, let's say, be it at the pitch where you try to minimize the pitch. We want to be a leader there. And I can tell you, let's say, from my personal perspective here, we will invest a lot more in R&D and get more progress there to continue to be that top player.

Q: Congrats on the great results tonight. Edwin, for investors who have not met you or had much experience with you, maybe you can share with us a little bit about your background, what led you to TTM. I understand you have some connections to the Board of Directors, but sort of what led you to the company? And maybe talk a little bit about how your experience and background leads you to succeed at TTM.

A: Okay. Happy to do that, Will, and good to meet you, by the way, and thank you for your nice words here. Yes, my background is, I'm an engineer. And of course, I did business school as well. 15 years, Philips, 20 years, DALSA and Teledyne, 9 years, let's say, leading the largest segment in Teledyne, the fastest-growing segment in Teledyne. And the last 2 years, I was the CEO of Teledyne, working closely with the executive chairman. And by the way, the new CEO as well, still really good relations with Teledyne and Teledyne will do great. But for me, it was time to do something else after 20 years. And TTM was a really good fit. My background is physics and electronics and mostly semiconductor physics. So with TTM being a player in the back end, let's say, where the back-end players in silicon, the packagers, the PCB players, everybody comes together in that back end is absolutely a key thing to focus on. I still have great respect for the guys who are making the most complex chips. But nowadays, it's all about the back end. How can you integrate these chips, let's say, in a very compact heterogeneous package. And that's very exciting. And that's my main motivation to be part of TTM, a fantastic company, excellent leadership. And again, a good relation with the Board of Directors. I know a few Board of Directors members, let's say, from my previous work. But again, this is a great company to be part of. Hopefully, that answers your question.

Q: That helps. And one more, if I can follow up. The -- I don't know that these metrics are still entirely relevant because you're growing much faster now because of AI data center and also because defense is doing very well and margins are -- have been moving up. But at the last Analyst Day, the company had a 4% to 6% top line organic growth view and 11% to 13% operating margin target. Those were sort of the targets that the prior management team established. I can't imagine you're going to give us new targets on this call, but I wonder if you can help us think about at least which metrics are most important to you? What are you trying to maximize like from a, let's say, from an outsider's perspective, just looking at the financials, what metrics and what levels should we think so that we're aligned with your way of thinking for the future of the company?

A: Yes. Great question. Thank you. First of all, we want to grow. The strategic plan, let's say, and even looking at already at next year, it's all about growth and of course, growth in a very qualitative manner. So we want to make sure that our gross margin stays very, very healthy. That's basically the #1 metric where you say -- where you can see if you're competitive. So that's the key thing here. Of course, we like to generate cash. You saw our great cash position this quarter. Year-to-date, we're at a really nice level. This gives us a possibility not only, let's say, to do acquisitions, and we can do that both in a horizontal way or vertical way, let's say, buying more PCB factories or buying, let's say, up the chain. But also we can invest in our facilities, and that's what we do. We are planning to invest hundreds of millions, let's say, in our facilities in Penang and Syracuse and of course, also investing in China again. So that's going well. The top metric for me is always cash. It's always growth, it's gross margin. And of course, our EBITDA should be healthy. Bottom line should be healthy. But again, we are set up to grow. That's my answer here.