TTMI - Earnings call transcript Q2 2019

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Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the TTM Technologies Second Quarter 2019 Financial Results Conference Call. [Operator Instructions]. Sameer Desai, TTM's Senior Director of Corporate Development and Investor Relations, will now review TTM's disclosure statement.

Sameer Desai

Amanda. you, Thank

statements Exchange started, today's get of differ like remind these XXXX, and to Private annual recent outlook. and future Before due results Actual contains I forward-looking that including of the report Act Form call Litigation meaning XX-K forward-looking could to statements other everyone TTM's Securities business we Reform would related within to risks filings more Securities the most or materially in including uncertainties, our from the with and the statements one Commission. factors explained on the

as statements regarding disclosures whether other on on TTM may at on circumstances, does forward-looking registration X-K, a to information, law. TTM the new SEC found the risks as any publicly by or expectations Form presentation. the any undertake in except and refer revise which obligation to result the may of These company's assumptions the are events S-X based not update future reports this and affect XX-Q, statements, be date other Please the filings. these required XX-K, of or management's Form that statement of

discuss Such a SEC filed www.ttm.com. the to included at in measures with GAAP prepared is the TTM's you measures non-GAAP call non-GAAP this release, as and adjusted in accordance considered such of presented and direct press which reconciliation EBITDA. also certain we substitute was will measures We the be on to not measures should financial as available for company's GAAP, with website and on

TTM's go the Tom turn to Please to now Tom. Officer. Executive Edman, I would ahead, Chief over like call

Thomas Edman

quarter, XXXX performance call. Schull, follow us of by for QX a our the of Todd QX thank overview and XXXX highlights with second guidance. XXXX second afternoon and strategy, our our discussion financial a review our Good Sameer. CFO, with begin results. an quarter you from for of including quarter joining followed I'll our our business you, Thank conference will

We will questions. your call the then open for

quarter As expected, the second quarter challenging proved be for TTM. a to

to the our of able and range. demand we employees, at due the guided optimized non-GAAP the strength EPS in operating market, defense delivering performance were on margin, end softness the their commercial end of our and impact However, aerospace our to of that efforts operational high was minimize continued the

Our diversification this one. through as quarters discipline and helps us such challenging

In generated million of addition, cash in flow from the strong we operations $XX.X quarter.

cellular watermark financial our Looking low on factors diversification and of and in forward, automotive for bring excellence path as end profitability. our market, operational particular, on focused We improved end strategic discipline our we remain In differentiation. continue aerospace in and QX the and will forecast in differentiation we see as as a QX towards the well defense markets. and year, which rebound in the strong goals

over the continue Overall with $XXX in in agreed to budget and President in effort X-year already Defense The budget billion market support of which this deal, billion and $XXX growth Congress XXXX XXXX results the on of XXXX, the Department trends aerospace providing $XXX in billion. market. and defense of budget a healthy end a

for areas TTM, to significant fastest. munitions are systems, and among grow Two expected the missiles and radar

gallium CAGR. radar and by to the of AESA all continued conversion grow market the platforms, technology expected AESA adoption the at of is next-generation the XX% With of services based radar nitride an

and our benefit sensitivity, in capabilities. and upgrade This AESA and radar to next-generation and for increases a as defense technology systems for rotating range, dish turn is radar. mechanical traditional solid-state in allows performance customers radars. stands components manufacturing for subsystems of active TTM accuracy design in defense radar the which from electronically represents detection scanned stands programs RF and fixed, the defense AESA AESA array to greater leader and technology

global environment end continuing overall for aircraft to market rapidly the forecast significant at air growing aerospace and growth class. in addition, the travel with remains record In middle strong backlogs commercial the

record to a backlog Backlog years. milestone and in over continue new program win risen the $XXX of We XXX% past has important programs aerospace level significant year-over-year aerospace our for bringing our defense, million, defense over and a to and business. XX% X overall

We continue than alignment which programs XX. our on now aggressive critical number more

QX, customer design-to-specification through of X% defense major across Our aerospace new defense our revenues a requirements on market broad trends commercial on team's and both level. record a dual grew positive build-to-print in year-over-year and also capitalize We focus base and programs. achieving supporting

with and will from revenue with in we a TTM, program in of land-based expertise allow operational before what combined key have have system. that major wins opportunities synergies of of subassemblies we the to business We a RF future available RF satellite first $X for discussed on capabilities major seen see billion fruits TTM us system radar AESA-related as secure value over applications. to Anaren, engineering

applications in position to our very programs defense of market defense We with with iX acquisition ability increasing the the commercial aerospace the of address and in create goal our providing from support the and and new announced end recently We differentiator to across technology A Electronics. lines customers. us technical believe key future which for opportunities and markets. solutions core allow growth will spacing, for technology an ultimate defense assets further becoming our the value-add is and for this technology fine requirement of strengthened technology acquired differentiated advanced is markets

global electrical been infotainment in business efforts these of and the automotive to for which as have internal positions megatrends vehicles, base autonomous diesel, related not we global and sector, weakness develop demand increased has near-term Notwithstanding of advanced Unfortunately, for hybrid development continue and requirements. to impacted automotive away demand safety significant vehicle to from the world new in certain connectivity the particularly in has combustion programs in driving, compensate and our softness the pain business our to base and customer able short-term caused global transition engine. begins parts

to this support our be there goal as automotive of adapt a be Our above business industry. tremendous world amount continues in also while set the building to customers. a Because with technology-focused new, they innovative, electronics will the macro to of customers new existing innovation trends, of

remains well Our robust, design which bodes revenues. for activity future

automotive with begins automotive winning to In engagement won XX lifetime product ADAS-related. new program are years. value contribute in XX well a Designs future designs we In market, $XX a will of quarter, before customer were revenues that ramps. this we the which this year of million,

markets. Now to end review I'd like our

XX% XXXX. end the million XXXX. XX% the versus sales a Total $XXX program TTM, defense was last in sales total and second of million and QX of of to For QX million XX% in backlog and in market of compared QX sales aerospace QX of QX XXXX at end $XXX of year backlog of quarter represented $XXX

in from about to We total QX represent expect of this market our XX% sales. end sales

XXXX compares Networking/communications XXXX. the quarter of accounted for XX% XX% second quarter second revenue quarter This to XX% revenue of in first in of during the of and the XXXX. of

year-over-year to XG-related our expect cloud revenue. enterprise In While customers revenues, softness strong be declined of many to due we and in XX% this saw in we networking segment of growth spending. QX,

first year compared than QX second demand total and sales and XX% in global during weaker to were down quarter in year-over-year represented the of quarter in of XXXX to across quarter ago all Automotive the XXXX. the of expected regions. sales due XX% the XX% sales during declines Automotive

total in to sales contribute QX. XX% automotive of expect We

XX% capital total in customers and in was the XX% to in quarter first weakness compared second instrumentation saw medical/industrial/instrumentation the The offset semiconductor industrial XXXX. in We demand quarter ago market sales by global in industrial our year in end the contributed and quarter our that our of the than due of and market. XX% medical equipment more declines in customers to weakness strength

to of third the For be we this quarter, expect revenues. XX% market

represented computing/storage/peripherals strength semiconductor more compared soft. in to the of We XXXX digestion the customers spending sales total in XX% in phase remains high-end quarter in as semiconductor XX% and center the that of XX% than the with in in notebooks second XXXX. is data end and saw first cloud market market and a QX offset weakness in of was Sales quarter

represent of approximately quarter XX% this We expect sales. third revenues market in end to

The QX end XXXX. of quarter in accounted X% of in second revenue QX for cellular of market to XXXX in compared X% phone X% the and

XX% models as seasonal release to begin We the new we production prior our represent in of QX the smartphone second expect revenues in to half. of build cellular

Next, I'll cover some details from the quarter. second

HDI, in and in computing QX. aerospace During technology includes business, growth subsystems the and accounted for rigid which markets. ago reduce substrate the and and year-over-year to and company's flex, our components, approximately defense quarter quarter, of XX% end revenue. This sequential our our XX% the year The and in RF advanced approximately increases compares XX%

our activities advanced new are opportunities business We design will markets. to in and pursue that capabilities new technology leverage engagement increase continuing customer

were The commercial compared to QX XX% Asia-Pacific utilization in year to due was quarter our softness QX. in Capacity in declines and markets. in ago XX% in XX% the year-over-year end

in XX% end continued was Our in our North XX% compared in overall to America A&D utilization QX and the strong North quarter America. as drive in levels year-ago market QX XX% in utilization capacity to

XXXX. customers ago XXXX the in sales total of year XX% second XX% contributed the X compared Top quarter to of the Our of in first quarter quarter in XX% and

customer second and quarter sales in in quarter X% X% of in accounted the XX% largest ago the for year Our QX. versus

last the end cancellations, of year second to QX, end $XXX.X of QX. At million end to at at $XXX.X the is subject million XX-day the was which backlog, compared the quarter million our and $XXX.X of

PCB by the ratio discipline. second manufacturing TTM's our commercial for structure business concerns X the like book-to-bill months operational cost and to emphasizing expressed our I recovery half well overall Our the of as commitment as conclude some was review footprint. the ending I'd July quarter, shape X.XX plans in of to to X. our Last about

other our at as a depressed such in levels. networking/communications cellular remain While end business recovery we strong QX, expect markets automotive and in

aligned continue that overall enforced demand result, generated in that we footprint ensure a of implemented As and structure and we'll $XX realities. to cost reductions annualized QX with is savings, million our

period the pay and discipline is diversification, demand for TTM, and TTM longer term, from for will softness emerge this goal our their cycles on in In our as improve. investors position customers an to strategic off our Our stronger of our even service to differentiation operational customers. focus

Now review second performance the quarter. our financial for will Todd

Todd Schull

Thanks, Tom, and good afternoon, everyone.

The XXXX organic quarter, of decrease commercial our was the quarter end million. second and of compared to partially in at revenue year-over-year aerospace of due sales in by $XXX defense $XXX.X core growth first of quarter sales second our markets net sales to XXXX market. million to compared the and $XXX.X in declines offset For net end were net million

$X.XX to second a was $X.XX XXXX. quarter second the income GAAP net $XX.X first or to last XXXX XXXX. operating per for of basis, the million valuation of was quarter second the of or diluted million the in million million of million $XX quarter of results quarter second quarter year compares $X.XX of a million of the of $XX.X in related the for income GAAP Anaren. quarter share year in and million compared in a in loss the On per the second income $XX.X last share. $X.X tax of allowance to quarter $XX.X XXXX of diluted share of purchase release XXXX net of and or the included first This The per $X.X

financial on The non-GAAP remainder our of my comments will focus performance.

restructuring the management the performance non-GAAP to insight ongoing eyes better company costs, enable acquisition-related other of non-GAAP see financial provide items We costs, financial certain company's and performance. Our items. infrequent to the noncash into information unusual expense to present or through and excludes investors

major of to XX.X% in and quarter XX% to Gross ramp-related our was commercial XXXX. end first markets and second The gross market. our in in XX.X% XXXX decrease inefficiencies the margin in in margin product in compared associated year-over-year lower second the a due primarily of volumes the launch was with end cellular quarter quarter

was $XX.X and and X.X% year net the or X.X% to million X% the a second of $XX.X $XX.X marketing compared Selling net net expense of or million or quarter sales in in sales sales million of quarter. first ago

in of a in the G&A Second previous quarter year million $XX.X or was quarter. and or net X.X% of the sales million quarter or ago net X.X% sales compared million X% net expense sales $XX.X same of to $XX.X

full for increase margin same in in compares quarter, million the was an Our last $XX.X first quarter. year in quarter X.X% expense million was X.X% term QX associated year last from the the Interest Anaren to offset of was as effect the same quarter debt of with the the million of rates repayments $XXX higher last by essentially incremental due acquisition loans since year. X.X%. $X.X of operating to This and second interest quarter

of of During million EPS loss approximately or foreign in XXXX. incentives or $X.X the in compares exchange Government gains. gain approximately to or first and of $X.XX $X.XX million the quarter, of $X.X a year $X.XX this gain of quarter brought we recorded to a $X.X total QX EPS. $X.X This approximately million of million last

the tax was XX.X% rate in effective Our quarter. second

second income diluted per net income net income first share XXXX $XX.X diluted $X.XX or net million quarter Second This or XXXX $X.XX and per $X.XX to was share. $XX.X quarter compares per of million diluted million or of share. $XX.X quarter

was Adjusted XX.X% quarter $XXX the net quarter sales. EBITDA of for of $XX.X sales. or of million first sales $XX.X was net EBITDA compared second of XX.X% $XXX.X XX.X% In adjusted million adjusted -- XXXX million the net or to first EBITDA or quarter, million

$XX.X Cash compared last the to in in million year. flow quarter from $XX.X the strong same second operations was a million quarter

to XXXX, million cash first year. during months X $XX.X from For of million the same $XXX period last flow compared the was operations

million second we first to for December mature capital repayment the for end quarter $XXX.X Net of the of in which Cash was cash million $XXX.X the convertible accumulate second for will quarter and the bond, in increased at cash $XX.X of was as XXXX. spending Depreciation million. million. from the $XX.X quarter equivalents quarter our the

Now to for the turn I'd to third guidance quarter. like

of be the expect million to in the XXXX third to revenue $XXX million. of $XXX We total for quarter range

The in to expect share. million per $X.XX count range based EPS be to $X.XX a shares. earnings the XXX share of approximately We of forecast on non-GAAP diluted is diluted

count dilutive bonds. associated options share as RSUs Our with our guidance securities such but and shares no includes convertible

quarter. expect of will X.X% SG&A be expense about We in revenue the that third

about total expect We to million. interest expense $XX.X

XX%. and rate to between Finally, XX% we be tax effective our estimate

your To developing we assist financial in offer additional information. models, the following you

approximately of We record quarter of amortization million expense we and to about $XX of third $X.X stock-based -- expect compensation million depreciation $X of the $X.X million, $XX.X intangibles during interest million. will million, estimate be about noncash expense approximately expense

Industrial Bank the to Finally, XX, August XX. September the City Hardware Technologies Needham in Deutsche XX, be Leveraged I'd announce Scottsdale Communications the Jefferies New in we'll Finance that in Conference Conference Semiconductor Infrastructure on Summit on Las Vegas Deutsche the and on York like Conference participating Chicago September August in and XX in Technology on Bank

prepared concludes to questions. we'd like our open line remarks, That for Amanda? and the now

Operator

And Research. Fox question from Cross Instructions]. our first take Steven with we'll [Operator

Steven Fox

of couple A for me questions could. if I

And of follow-ups. sort a just Has that you I some have you can the Is all, that's ramp. the quarter? of it of with into been -- clarify First inefficiencies something cellular resolved? mentioned then ongoing couple

Thomas Edman

Yes.

than -- So that, what quantities happened forecast. there a started production the I had And the because really, ramp. -- highlight it, would Steve, at this we ramp in our of very of just is earlier bit call the kind Tom early of course, you're starting in

And that's that we saw. inefficiency of the kind so

would forecast, we that be look occur as Usually, really our we -- QX. would our ramping ramp at in

our on now that's bit guidance. little early in focus bit But why a in started a more in of optimizing inefficiencies yields digital terms incorporated a this quarter, and little full year, there. we're on Just and that's what's third ramp it's the with into

Steven Fox

then my mentioned being the quarter. which in of when cellular current And is at that of outlook, helpful. That's you the follow-ups, sales leads I look XX% one into

now seen So is in a that of is other there point peculiarities that being reflective few on regular years? in we've you'd of Or market out? ramp the last sort that any

Thomas Edman

the ramp. third No. know, continue, cellular quarter, third quarter. focus some Usually, is sell-through. yields. continuing Very around get visibility will And frame as when that on that we'll quarter first in that we the December similar certainly that be ramp, into and on you the optimizing Fourth is time the in just

the as it the situation been that's year in past. has So this

Steven Fox

puts takes on little to PCB And orders a going mentioned the maybe got there That's picture there's market. you are what's depending -- helpful. Great. lot how you Obviously, you by from relative now book-to-bill and which provide a is and just in level X.XX. to of Can that of big sales then a bit on maybe there? covers how your color under and lastly, standpoint,

Thomas Edman

you the a if and of what markets, seeing our commercial Yes. and in look and Sure. defense aerospace just Interestingly, you're defense and at and piece. right, aerospace is book then

million. program it's backlog backlog, short-term piece look, is mentioned, calling $XXX As have a of XX-day backlog. are a that Only what which of official is of -- small that, I we in course, we really

a moving the there So in seeing comes that flattish the The really half the What of bookings. what piece of rest you're in cellular. backlog is in. of that ramp in piece of is back terms That's relatively terms quarter. the during market's

bit primarily a past, consumer ramp the in as little business So is phone that with it's contributing that the to of buildup.

Operator

take next Stein from our William will We with SunTrust. question

Joseph Meares

its to stand on with Joe does for to financial another Meares This today Stein. readiness acquisition? in Will and company Where regard the management engage is

Todd Schull

Yes.

me cash let the clear on We're company primary focus the be that sheet. pleased our on we Very very the continues with be generated one. that balance the flow in to -- So managing for quarter.

a great indicator challenged. even organization our markets and management more our also Todd certainly for are in how TTM that operational's brings I when a think they're -- that's to of executing but discipline the the bit

job So tremendous there cash flow. generating

Now turn, that in flow, we focused. are cash

will next our we business, Todd priority for our to and coming late invest will course, as convert indicated, a we year, in next our also but pay prepare, continue year. debt Of due down as

the number So one. priority sheet balance that those -- is managing

always So paying looking on is the down for But I that's for you the that fit sheet, we our debt. answer the our of -- company that we for guess M&A that course, managing are priority strategy. into balance opportunities

Joseph Meares

Great.

I'm an Anaren can update automotive in to cross-selling on end the regard us touched kind market. you just guys markets. traction with You in and other end this give of wondering if

Thomas Edman

Sure, yes.

aerospace because side commercial we're activities. had and immediate doing bit Anaren and the you're we had defense the with largely commercial the on the to right. longer areas, one traction and as little has on capabilities we What requirements starting for tended frequency highlighted and networking another be a us, and then engineering there, progress we're several We expected, Anaren support. So being capabilities side, we're term customers where those because there, outside optical struggle that area higher and and look automotive with bringing taking brings being RF to to we're there now seeing the

I for continue for It Anaren are you antenna longer-term course, position on in traction is the XG for the And RF that particularly and us. meantime, we the build-out. that to is so of benefiting, -- gain brought from can -- we in the on us effort a side And what component tell component immediate XG opportunities there.

So see to certainly benefits Anaren the continue from the combination there.

Operator

take We'll with Stifel. Matt Sheerin our question next from

Matthew Sheerin

Just another segment. question regarding automotive the

You've you're exposure been some one I being you that guidance, diesel to the down bouncing it talked Are a double little flattening based that sense year-over-year orders How like X know and getting China some digits see seeing come quarters of a while? back? starting are I here? got bottom looks going of for know headwinds, out? but a will sequential Are playing sort for are a things to that the of Or on growth. now, about or China there bit EV. to here around them. we start do you've be signs you bottom to you

Todd Schull

Matt. Yes. Thanks,

So you're right.

look slightly think we sequential QX in QX, to were if down I you automotive.

of just inventory little year-on-year, in bit I look point. at primarily a course look we you to this automotive. down If would on numbers work-through automotive. yes, at forward, of attribute as And what improvement were we're we're to looking QX, the guiding is start substantially If that

certainly, out period unit I terms of time. there's of is demand, end And -- frankly, -- softness I an for to extended see terms to think period In this a I going automotive in think of overall a demand, of be market think in continue we're lot soft there.

this that, a estimate, me think long longer-term is how is to Now -- but for to situation. hard I

as Of continue call and grow of ADAS, course, activity some continuing we see we automotive automotive. which growth will to see vehicle to that a to the EV and other we is see activity the market, related really what what percentage where in our of autonomous is the

growth bottom, back goal to So that continue that now are that traction you is of see said, to bouncing on as -- unit along go the automotive. the forward, sales, to start to as in growth sequential in our we so we come sort area that you gain start

Matthew Sheerin

other have and December. Okay. appreciate December. in seeing And know visibility don't I a you've into but been then business in cycles, on of in where growth the down December in ton I that huge uptick prior September, had September a and the -- you're and -- quarter, you've in cellular cycles, you probably sequentially But

and should So sequential are bookings getting a terms see of visibility -- growth least December? at expect some in and to where number, the you maybe you your sense in

Todd Schull

Yes.

optimization. forecast But -- early had experience, think very I the I at sell-through. year's QX, hard some it's So last determined really, focused point. the in The -- QX this rest visibility. as -- it to on and given then particularly is said, QX, we're we yield by

would I which is I so be for or And of sort seeing bode part I but mean year would think finish what we're base, the -- might say that cycle. encouraging get, on that that flattish inventory believe next to on seeing QX, are yes, management the out we we of more what QX as believe customer well we QX, it's of disciplined

channel was from affected still really, we major down past There cycle particularly QX the But QX. because inventory. QX As are inventories difficult had then remember, in QX. was you and this big that a

that So we've the will the one that we're this learned every hopeful management again particular the help cycle. all place is -- that in supply discipline lesson in inventory chain that

Operator

Needham from next from And we'll Company. take question & our Jim Ricchiuti

James Ricchiuti

-- at range is particular being of looking vertical, QX, wild revenues cellular card? bigger that any toward if skewed the the Wondering I guess for range

Todd Schull

Yes. Jim. Thanks,

bit -- you're where in a at this the in period. Frankly, and an we've we're cellular. uptick little computing. a bit, -- a and defense situation is little very that's see automotive, and then slight uptick is of going -- the as summer covered aerospace aerospace So certainly, the defense big and just look is There to one you that's if quarter-on-quarter, looking

out to just constrained the more ability we're So our anything than product door push else. by

again, year-on-year improvement in QX, you'll big you say and that's to if big of then little why automotive that an see is harder generate So sequentially But a well. little bit a the improvement. cellular I'd mover sequentially, as in but bit uptick that a look

James Ricchiuti

that auto And is then bit and quarter of out stronger -- you Or business would little defense that a thinking -- portion seasonally, you see where about aerospace just a if looking QX, the the pick to talk business. seasonality about could maybe that in up that bit? a

Todd Schull

purchase an uptick in Yes. of absolutely an year, The purchase interesting. push in sort It's case, hands certainly a bookings. aerospace there'll Not order we close usually sort and those as close the and base. a defense be but standpoint, of is from expect, of supply the the -- out up would that We the always you're right. orders get there's to calendar orders

capability is we from out as see been adding that. is course, So relatively and be, we've seeing enabling revenue what aerospace capacity, continue push do to of to adding more And you we're our products a us what's the to the standpoint, we'll revenues. in door But look consistent grow ability and if at defense. out

you of the tied And that's our from seeing be revenue a really you'd standpoint to a cycle in market. what so end steady you'll -- that be capability. would than that rather But terms buildup see should

James Ricchiuti

the just question Tom, then And for me. final

maybe of that customers? Or recent based how vertical, the with tone -- at you how you've talked has performance, On kind geographic as And -- discussions the is changed it to it auto sure. customers, the had regions? across Is broadly is pretty has QX mainly Europe? in looking I'm that

Thomas Edman

Yes.

question. great So

past had China, interesting we the was saw thing think weakness in the was pronounced quarter, in past the that weakness in this and broader. whereas I what seen quarter, this we in Europe previous quarter

we where So softer area demand. too as an America saw come in North we saw

a so would development. And say, that I new was,

in conversion electric also As alternative is is the I'm talking and a there the now that belief -- in and I've towards longer-term hearing terms and but this China, subscriber that EV, longer-term in and -- occurring of customers, caution this Europe the a to primarily more certainly, certainly towards is situation unit like energy to hybrids. vehicle, sales what I'm in been vehicles around

customers to terms because on see is there's And why that, a is which term, now -- feeling the to now is buy of now that I I'm going to they're -- shift shift as is that that some challenges going and need commencing, becoming or higher short that forced is what in PCB decisions in more higher certainly, being the that's the that and of that we're be future to consumers structural are into longer of per of to it that term, and in we're type really more feeds in a again, terms this from in that -- new of of and value this transition pause content push used vehicle but internal make electronics therefore, vehicle. vehicle period think sense into engine-based the technologies. some And to hearing traditional buy whether they makes combustion --

vehicle, is into So new around some to the of automotive Things that's really set EV support autonomous type of sort continuing again, Internet on that pushing seeing developing, of customers are been that why even our emphasis has sort -- applications. and around of what, we're a customers

So is from that standpoint, very activity the development exciting.

I think on term. demand longer that the and shift consumer -- is is the causing customer in now for bodes well right but behavior damper

Operator

will question our with from take Um next We Macquarie. Maynard

Maynard Um

through the impacts biggest if factors What quarter? gross us Was it walk Maybe mix? the were were. what product sequential decrease in could the in in you primarily margins biggest the the

Todd Schull

From a sequential perspective?

Maynard Um

Yes.

Todd Schull

think of markets some of the growth challenges. A&D things. I there's But -- we been One, two softer a and commercial in some and the some little that's obviously, created volume that bit good so fluctuations had so that news. were

-- timing ramp that issue other to, that annual I in the really of that Tom cycle question. at regards at ramp And the our new and launch our first one the our do The at talked products think, was we cellular.

year, Last This more in get earnest it until more going June. in July. didn't started really in ramp year, that

-- that's just biggest we onboarding issue. in QX. so That's are and you that typical But challenges labor. a a that QX the ramp. type costs it's very That's yield really difference. And of productivity didn't on and timing saw And have in of of kind

Maynard Um

I guidance had if for in the XX.X%. -- looks I -- is reversals is look margin some XX%, of much guess and If it all versus midpoints, utilization that guidance how look the gross other you of next of that quarter, issues QX? sort your your at of maybe So at like the I -- is just pick

Todd Schull

improvement sequentially had I -- of our would our here. quarters, the an in some XXs, extremely they've situation footprint. venture last in Tom say numbers. which The Well, with Asia is big utilization extreme for strokes volume that is challenges is X to quoted been of low about driven. that Asia XX% utilization. We

seeing some a from recovery there's good big flow-through You're that. and

So on about the improve we quarter. driving of then as X/X improvement. expect And yields the we through that's to go

some And bounce-back the so from QX. we what that's in talked of about

Maynard Um

the increase? commensurate of of your bigger we become I like picture, an tightening that? one, decline your share a one on I Okay. I I And about electric. EV, think say, share into incremental within if and that more drive feel because you've transition think, emission sort to is for and across would got of on were sort that standards, side, to, should ICE on lot your both how look If content share happens then then if aggressive potentially the which and benefit Or sides the be for increase one at you year that just we OEMs, will look OEMs, go let's of next on it think automotive the hybrids

Thomas Edman

movement right say now. much That's in EV a And there's I reason is because question. so fascinating the that

China. And us do But that's over critical. China win who's big that so the we I would a is is a at come in to think terms winner to X we're it's is that's going I that of business be given going and you -- is our with build who eyes right, volume how sort overall. going share and because one question on would what -- time. back of X we probably in I to Where shift for how have of out to Today, you're position in position -- the say and there,

of So that's focus certainly for us. an area

evolved with say they're very The happens Xs big the Right certainly I on Europe, so perhaps and in Xs strong question they're China. the and is how terms of has in relatively strong. their EV. in so what other Tier less would Tier less in now the U.S. positioning

is our in North terms build we America with of So certainly there outside maintain presence the to Tier in a of China. and our goal Xs position EV -- position

going situation. an certainly that's So to ever-changing be

a will benefit You're -- absolutely looking with for the content dollar $XXX on and vehicle. we're PCB vehicle $XX right. you're upwards on again us, average average in -- per standard EV looking of at per The $XXs versus an

we that, us. PCB of to our content definitely, benefits for again, position make what sure So The drive call that, the customer continue Xs. now is and to the other Tier us grow we maintain mix

Maynard Um

good you've the track sounds Okay. actually exception had And free free to a improve side, manage do last generating you pretty and much cash as in trying cash then flow on And with cash of flow. as record net you're like of income. it the year, the flow

I'm you generate So actually just income if be. you think net will what can this year your curious above

Todd Schull

that's a iX We've operations flow cash -- -- cash So We and on million inclusive obviously from Tom mentioned. is free range provided in that guidance $XXX less generally still net our and expectations. on of CapEx CapEx flow CapEx be $XXX to million acquisition cash in expect our or that to that been of the combination investment. XXXX, we've

plan. of that absorbed we've kind So CapEx normal at our

you working flow on of to capital. now no ours to little to for focused they to digest There's bring to discipline That's different things and fruit, -- with several the try bear that acquired making improve working had to ground. And are at starting big our little bit runs and we've focus had try And home from we're of That our working Anaren, that. progress. model a operations, been when but million tough working a capital When to we look there. years is that improving been metrics. we're a additional and we X processes cash capital

of we company reflected operating that on in model. part Some our on to second that, the focus as basis as and I quarter, our continue here is regular think, in results a a of

we we first To from quote flow that. cash you good certainly, would we've a of number, year. when not to at had I'm the we do from operations, in exact half expect -- seasonality last an position look really a cash But operations. see in flow to compared our year And typically,

look CapEx any quarter, it then if quarter can't standpoint. see the get in couple -- from -- a from provide you flow flow an guidance, time, over flow up, really you your And give estimates. so you But if deduct uptick estimates of don't the a operations. up you specific number from I cash your period from you should there So cash as guidance We there can free second the there, ramps of cash pick from fluctuate. flow operations cash a would given half

Maynard Um

Got it.

A&D Okay. side. And last one just the on

on by think optimizing I customers. lines some were other working you constrained getting and validated the capacity

a business? that's can made won't to on machinery, the going. that an with give maybe increases plant. any to be an there asset if update of there also any I that's relocated update it to guess backlog just function sort sounds I in relieving acquisition You some capacity, think, be Chippewa but Because us step you on like the the of how going

Thomas Edman

Yes.

program. in optimization and in we we It's aerospace should of any utilization function is, sure improvement of first to given have is you defense. are a moving optimize incremental. part said, -- and that facilities. that's steady I in us our facilities capacity And cross-qualified of across think those our capacity turn the the allows our making and a for work to between That so as lead So one more in facilities that effectively not

So we to there. continue make progress

I move. out our willingness with kind as that us pointed the to we've do been really I -- allow pleased think of customers' to quarter, last

I from our think of customer nice base. statement that's confidence a

and do to there. as in capacity will us we continue to that going that, help we're to So terms capability increase of our continue incremental adding

acquisition acquisition, at circuitry of And be the miniaturization Chippewa targeted the the again, of you in line of terms is our our assets Falls, next year. be -- facility have right. early we'll acquisition, requirement small to primarily requirements, We're to finer that relatively capacity assets timing this customer asset Wisconsin those moving In a base. that going iX

So Q there we would start to see some the in into capacity of in QX -- late but year -- next again, limited QX. benefit capacity

fulfill the more approach as a give capability reliable -- our circuitry in us that really or finer U.S. their to does from base But customers miniaturize robust line for in acquisition, requirements it continue requirements. the our primary with -- customer to

you'll capability limited revenue I'm From So contribution, very us. is kind time immediate capability. excited but how see of critical that standpoint, about over the a for

Operator

next with Paul from our take Coster we'll And question JPMorgan.

Paul Coster

us Can Huawei? from and you that comment the chains you are are then And terms domicile to the China disadvantaged sort possibility on that corporation. doing into in somewhat business what local of expand some sense you of of give now in of with not you're the given supply integration

Thomas Edman

facilities somewhere Top been standpoint X% supply fortunately, product to -- out range. bulk has remember come our Okay. our of and Huawei of that in one our The based of so the as Huawei X that China The of and to China materials. traditionally and of China from you in out X% revenue, has to a kind of of Huawei revenue piece, contribution customers on

and boards, been of our printed China. out components that our we've of to some And shipments assemblies even of circuit our continue come so able backplane

to so applied able have out has And components export license. the an where to of the U.S. and And process ship been are not been been there, in -- our for have coming have we continue we

incorporated And to not certainly, would that that's we we shipping, again in hope so able but be commence our guidance.

And our the limited to we've news is ship. able standpoint, bulk there. customer. revenue very products, we a So care of to to take continue And our continue effect good of the from very, been

haven't a meeting we are look on But customers change their have you focus center been certainly Huawei of front relatively so effect China, to relatively at in outside here -- China, other for haven't our is and in in If production really there. our behavior -- put the for limited of the to requirements. customers approach China TTM and -- customers we seen TTM.

China We continue continue to that we'll customers there from focus. make there, sample a and real facilities and our support in our to

So gives answer, hopefully, Paul. you that the

Paul Coster

auto the hybrids Is is innovation I'm slowly sort you investments problem ICE massive lines -- really manufacturers Yes, swivel to transition? I a make milked go the sure. the of life autos and the product vehicles if and instead if new towards of questions possible sort mean -- And don't get I it as to that wondering on product that almost. in have it's possibility? Can as and that's the kind of manage the end just those well. back that of they of pivot of kind to [indiscernible] features and EV way this if a systems,

Thomas Edman

No.

that is a think I possibility.

the would there's internal the from for leaders I that a view customers of legacy continue engine us will that be emerge I've Tier some the certainly combustion in continuing that amongst at on a Xs, business side. view, service to the least we'll there's as -- they And heard customers think their is -- lately, to ongoing manage.

capabilities to building the then own side. -- their their on building starting or pivots own Huawei -- EV

to through support their support and in what those our -- base they effectively we're for them will is And the activities development particularly. that's even customer Tier part structure of been base. support customers, their if continuing on traditional X what continuing as customer our they has suppliers And work strategy as so continue EV that life those to again, doing on primary programs the them supporting

will to a be I So position that, it good absolutely think customers. conceivable in -- that we support doesn't those is and

Operator

now any would Tom closing remarks. to over like the to call for I back turn further

Thomas Edman

Thank the made I'd you. to that points summarizing I just earlier. Yes. by like some close of

strong end the in weakness flow high at earnings and delivered end cash generated commercial we First, the guided despite of our range markets.

diversification, while goodbye support. our core of for Thank environment employes, continue discipline. we and I'd in strategies some thank our well to markets, our facing demand tough your continued their execute investors our and and on our like And customers and you to finally, differentiation we're commercial a of end Second,

Operator

participation. your for you Thank call. today's concludes This

now disconnect. may You

TTM (TTMI) 31 Jul 192019 Q2 Earnings call transcript