TTM Technologies, Inc.

Thanks for everyone's patience. So we're going to start the call now. I've got Tom admin with me and Todd show as well. So, let me just read the safe harbor statement before we get started. So, before we get started, I want to remind everyone that today's call forward looking statements within the meaning of the private securities litigation reform act of 1995, including statements related to future business outlook. Actual results could differ materially from these forward-looking statements due to one or more risks and uncertainties, including the factors explained in our more recent annual report on Form 10-K and other filings with the Securities and Exchange Commission. These forward-looking statements are based on management's expectations and assumptions as of the date of this presentation. TTM does not undertake any obligation to publicly update or revise any of these statements, whether as a result of new information, future events, or other circumstances except as required by law. Please refer to the disclosures regarding the risk that it may affect TTM, which will be found in the other reports on Forms 10-K, 10-Q, 8-K, the registration statement on Form S-4, and the other companies' SEC filings. We will also discuss in this call certain non-GAAP financial measures, such as adjusted EBITDA. Such measures should not be considered as a substitute for measures prepared and presented in accordance with GAAP, and we will direct you to the reconciliation of non-GAAP to GAAP measures included in the company's press release, which was filed with the SEC and available on TTM's website at www.ttm.com. We've also posted on the website a slide deck that we refer to during the call. I will now turn the call over to Tom Edmunds, TCM's Chief Executive Officer. Please go ahead, Tom.

Thank you, Samir, and let's just make sure we're recording as well. I do want to apologize again on behalf of the company for the issues we had with this call. Unfortunately, it appears that the service provider for these calls was acquired and did not inform us of that change or the change and did not set up the call. So my apologies for this. I hope you will bear with us here and we'll do the best we can to respond to questions at the end of the call. So with that, let me just get started. Good afternoon to all, and thank you for joining us for our third quarter fiscal year 2022 conference call. I'll begin with a review of our business highlights from the quarter and a discussion of our third quarter results, followed by a summary of our business strategy. Todd Schill, our CFO, will follow with an overview of our Q3 2022 financial performance. and our Q4 2022 guidance. We will then open the call to your questions. The quarter's highlights are also shown on slide three of the investor presentation posted on TTM's website. In the third quarter of 2022, TTM delivered a solid quarter with revenues in line with the guided range and non-GAAP EPS above the high end of guidance, despite a challenging supply chain and labor environment and the continued impact that COVID-19 is having on our business. While the results include the first full quarter of telephonics, I do want to call out that the rest of the company saw revenues grow 8.3% year-on-year, driven by broad-based growth across all end markets. On a year-on-year basis, we saw significant improvement in our profit margins in Q3 from better product mix, higher pricing, and premium revenue. Also, the addition of telephonics and favorable foreign exchange rates, as the Chinese RMB weakened further against the dollar. I am proud of our employees for delivering solid results this quarter. As we look into Q4, inventory adjustments and supply challenges tied to some of our commercial customers are contributing to revenue and margin declines, but we will continue to see our business supported by our diverse and market mix, including our A&B business, which, with the addition of telephonics, now represents almost 40% of our revenues. I would now like to provide a strategic update. TTM is on a journey to transform our business to be less cyclical and more differentiated. As part of this strategic transition, near the end of the second quarter, we closed the acquisition of Telephonics. Over the past several years, TTM has consistently emphasized that a key part of our strategy is to add value to the product solutions that we deliver to our customers, particularly in the aerospace and defense market. In 2018, we acquired Anoran, which broadened TTM's product portfolio into highly engineered RF components and sub-assemblies, as well as adding critical RF engineering capability and resources. Telephonics builds on ANRIN and TTM's customer-driven culture and disciplined approach to engineering and manufacturing by further broadening TTM's aerospace and defense product offering vertically into higher-level engineered system solutions and horizontally into the surveillance and communications markets while strengthening our position in radar systems. The aerospace and defense end market will provide growth and stability in a potentially challenging demand environment for commercial markets. In addition, over 50% of A&D revenues will be from engineered and integrated electronic products, with PCBs being less than 50% of the overall contribution. Telephonics demonstrated strong performance in their first quarter with TTM, and integration is well underway. Adding another element of our differentiation strategy is the current construction of a new state-of-the-art, highly automated PCB manufacturing facility in Penang, Malaysia. The decision to build this new factory is a direct response to our customers' increasing concerns about supply chain resiliency and regional diversification, and in particular, the need for advanced multilayer PCB sourcing options in locations outside of China. The new facility in Malaysia will assist customers in our commercial markets, such as networking telecom, data center computing, and medical, industrial, and instrumentation. We made great progress on the Malaysian facility this past quarter as we completed the 3,900 pilings required for the building, laid the majority of the foundation, and began raising the steel framework. We also received multiple deposits from customers with whom we have signed long-term agreements, which provide a business base for over 60% of the planned new capacity in the building. Recent news on increasing export controls to Chinese companies reaffirms our view of the importance of regionally diversifying for our customers' supply chain resiliency needs. Finally, I'd like to say a few words about the overall macro environment. We are aware and understand investor concerns of an economic slowdown and potential recession, which would mostly impact our commercial business. We will continue to closely monitor global economic influences on our commercial business. We have seen a booking slowdown in parts of our commercial business, as some customers focus on managing inventories, while others continue to struggle with supply chain challenges. Our backlog continues to be robust, however, and we expect the aerospace and defense market to provide strong countercyclical element to our commercial business if conditions weaken further. Now I'd like to review our end markets, which are referenced on page four of the investor presentation on our website. The aerospace and defense end market represented 38% of total third quarter sales, compared to 31% of Q3 2021 sales and 30% of sales in Q2 2022. The majority of the year-on-year growth was due to the inclusion of telephonics. Excluding that impact, our A&B revenues grew 7.0% year-on-year. We continue to experience a positive defense climate with our A&D program backlog at $1.16 billion, including telephonics. Excluding telephonics, program backlog was $871 million compared to $723 million a year ago. This solid backlog was driven by record bookings of $319.4 million for core TTM, and $387.8 million, including telephonics. The solid demand in the defense market is a result of a positive tailwind in defense budgets and our strong strategic program alignment and key bookings for ongoing franchise programs. During the quarter, we saw significant bookings for key programs, including the SPY-6 radar program and a major space program. We expect sales in Q4 from this end market to represent about 40% of our total sales. The medical industrial instrumentation end market contributed 19% of our total sales in the third quarter compared to 20% in the year ago quarter and 21% in the second quarter of 2022. Revenues from this market were up 18% year-on-year, exceeding $100 million for the sixth quarter in a row and performing much better than expected, with broad-based strength across all segments. For the fourth quarter, we expect MI&I to be 17% of revenues as Quick-Turn continues to moderate and select customers face component shortages. Automotive sales represented 15% of total sales during the third quarter of 2022 compared to 18% in the year-ago quarter and 18% during the second quarter of 2022. Automotive revenues grew 1.6% year-over-year and exceeded $100 million for the fourth quarter in a row. We continue to see stable trends for automotive PCBs despite the combined impact of supply chain and demand disruptions caused by COVID, the Ukraine-Russia conflict, and semiconductor shortages that are all impacting automotive OEM production. We expect our automotive PCB business to contribute 16% of total sales in Q4. Sales in the data center computing end market represented 14% of total sales in the third quarter compared to 14% in Q3 of 2021 and 17% in the second quarter of 2022. Revenues from this end market were up 18% year on year due primarily to growth from our data center customers. We expect revenues in this end market to represent approximately 14% of fourth quarter sales as data center demand continues to drive year-on-year growth. Networking communications accounted for 14% of revenue during the third quarter of 2022. This compares to 16% in the third quarter of 2021 and 14% of revenue in the second quarter of 2022. We saw relative strength on a year-on-year basis in networking as compared to telecom, as we continue to allocate capacity for high layer count boards to our data center computing and networking customers. In Q4, we expect this end market to be 13% of revenue as customers manage their inventory levels. Next, I'll cover some details from the third quarter. This information is also available on page five of our earnings presentation. During the quarter, our advanced technology and engineered products business, which includes HDI, RigidFlex, and RF subsystems and components, accounted for approximately 41% of our revenue and now includes all of the telephonics revenue. This compares to approximately 29% in the year-ago quarter and 33% in Q2. We are continuing to pursue new business opportunities and increase customer design engagement activities that will leverage our advanced technology and engineered products capabilities in new programs and new markets. PCB capacity utilization in Asia Pacific was 78% in Q3 compared to 91% in the year-ago quarter and 88% in Q2. Our overall PCB capacity utilization in North America was 45% in Q3 compared to 50% in the year-ago quarter and 42% in Q2. The lower rate in Asia Pacific was caused by a decline in production volumes, while the lower year-over-year rate in North America was due to additional plating capacity added earlier in the year and direct labor shortages in certain regions. Our top 5 customers contributed 33% of total sales in the third quarter of 2022 compared to 30% in the second quarter of 2022. We did not have any customers over 10% in the quarter. At the end of Q3, our 90-day backlog, including telephonics, which is subject to cancellations, was $672.9 million, compared to $594.8 million at the end of the third quarter last year, not including telephonics, and $703.7 million at the end of Q2, including telephonics. Our book-to-bill ratio, including telephonics, was .92 for the three months ended October 3rd. The book to bill was below one due to a decline in bookings in our commercial business as lead times were reduced and customers managed inventories and fixed supply chain challenges. I do want to thank our employees for continuing to contribute to TTM and our critical mission of inspiring innovation for our customers. Our business performed better than we expected as a direct result of our employees and our supply chain partners concerted efforts to support TTM and our customers. Now Todd will review our financial performance for the third quarter. Todd? Todd, you may need to come off mute.

Todd, hit star six. You'll be able to come off. Star six. Okay. Can you hear me now? Yeah, we can hear you.