TTM Technologies, Inc.

Good day and welcome to TTM Technologies' third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Shawn Hannon, Vice President of Investor Relations. Please go ahead.

Greetings, everyone. Welcome and thank you for joining us today. I'm Shawn Hannon, Vice President of Investor Relations for TTM. With me on the call are Edwin Roks, our President and Chief Executive Officer, and Dan Bailey, our Executive Vice President and Chief Financial Officer. Before we get started, I'd like to remind everyone today that the call contained forward-looking statements, including statements related to TTM's future business outlook. Actual results could differ materially from these forward-looking statements due to one or more risks and uncertainties, including the risk factors we provide in our filings with the Securities and Exchange Commission, which we encourage you to review. These forward-looking statements represent management's expectations and assumptions based on currently available information. TGM does not undertake any obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events, or other circumstances except as required by law. We will also discuss on this call certain non-GAAP financial measures such as adjusted EBITDA. Such measures should not be considered as a substitute for the measures prepared and presented in accordance with GAAP, and we direct you to the reconciliations between GAAP and non-GAAP measures included in the company's earnings release, which is available on the Investor Relations section of TTM's website at investors.ttm.com. We have also posted on the website an earnings presentation that we will refer to during the call. Here is Edwin.

Thank you, Shawn. Good afternoon, everyone, and thank you for joining us for our third quarter 2026 conference call. At TTM Technologies, we are focused on designing and manufacturing complex, advanced, interconnect products and printed circuit boards in addition to what we term up as up-to-chain products and solutions such as sophisticated RF modules resulting in subsystems and fully integrated mission systems for communications and sensing purposes. Core to the design of all our products and solutions as well as the strategy of our business is the innovative focus to safely next generation needs for our customers and end markets, particularly regarding swap or size, weight and power. We believe the future of electronics lies in speed to market, high reliability, and efficient technology integration, and we consequently engage early with our customers, often multiple years in advance as part of their program roadmaps to ensure this alignment while also enabling optimal management of their complex supply chains. It continues to be a very successful year for TTM so far. Our third quarter sets another new record with over 1.2 billion in revenue, and we expect to close out the year strong, aided by increased shipments of our M plus M product offerings for data center and networking and market, in addition to continuing strong demand for TTM's aerospace and defense business and product offerings. Proposal activity in our aerospace and defense business remain at all-time highs, with a record backlog of 2 billion We already have visibility into roughly 65% of our projected A&D revenue for 2027. Our medical, industrial, and instrumentation and automotive end markets also outperformed our expectation year to date. With all our business performing well in 2026 to date, we are increasing our full year 2026 revenue guidance from 4.47 to 4.49 billion. Since our last quarterly earnings call, we have had many exciting developments here at TTM, and we continue to execute our long-term business strategy focused on projected value creation for our customers and shareholders. As we framed at our investor day in May, TTM continues to invest in organic growth opportunities and technological advancements across our product offerings for all our end markets. in addition to strategic M&A to enhance our capabilities and add diversification and longer-term structural enhancements. To that end, we discussed three key strategic directives. First, investment in capacity and innovative technology for advanced interconnect. As previously disclosed in this area, we have invested or committed to invest over $1.3 billion in capacity expansion in the 2025 to 2029 timeframe across both our data center and networking and aerospace and defense end markets. While our commercial segment is currently the primary target for these investments, our model has proven over time that our investments in our commercial technology advances provide critical value to leverage into our A&D offerings as that end market continues to modernize. Last week, we announced an additional 400 million planned investments that is expected to begin in the fourth quarter of 2026 and continue into early 2028. And this would primarily support revenue production focused on the 2028 period. The basis of this initial investment provides critical commercial data center and networking and market customer support in their strong demands and road mapping requirements to utilize our unique M plus M product approach. Recall, the majority of our customer business in this market currently is with our industry-leading, innovative, established and critical AI players. will remind investors that our fundamental business model continues to be what we discussed at the investor day, and that is to pursue a very disciplined risk-reduced brownfield expansion approach for internal organic investments with the expectations to fund these efforts from operating cash without any anticipated needs to access our borrowing facilities. These investments have been given substantial forethought, are purposeful, aligned with our customers, and not simply reactive to the strong demand environment. Our commitment to these investments is driven by our confidence in our projected cash flows supported by our visibility to the anticipated strong demand requirements of our differentiated and advancing technologies. We are also in the early stages of investing in a new innovation center in the Eau Claire, Wisconsin facility, very close to our existing technology center in Chippewa Falls, Wisconsin. This facility will spearhead our intensifying R&D activities focused on pioneering technological advances such as M-SAP, SAP, passives, and embedded optics, among other technologies. Second, Recall that we are extremely focused on our diversified business model and that, as part of this, we've pursued our initial geographic expansion in the European region. In June, we announced our intention to acquire two well-established European companies, Switch Technology Group and ILFA, to begin this effort. We've since closed the Switch Technology Group acquisition, now called TTM GS Swiss, and we believe we're nearing the close of Ilfa. On Monday, we announced the planned acquisition of Ophir Optics, which would establish a presence in Israel and Romania. I'll share some additional comments on Ophir Optics in a few moments. Additionally, we engaged last week in plans to acquire two small but strategic printed circuit board companies under the Merlin PCB Group holding company. in the United Kingdom. We are excited that all these transactions are both strategic from a technology and capability standpoint and also in terms of adding international diversification to our business information model. Finally, our third strategic directive is investment in what we call up the chain of vertical product solutions that focus on communication and sending. In line with this directive, we acquired Epic Solutions, which is closed on September 30th. We are excited to welcome the Epic team members into TTM as we continue the integration activities. The announced plan to acquire Off-Air Optics also supports the team of Up to Chain, and both these companies bring a unique set of competencies that will deliver differentiated and high-value solutions to our end markets. I now provide a few additional comments on the proposed acquisition of Ophir Optics before we move on to discuss our operating results of the quarter. Ophir Optics is a global leader in precision infrared thermal imaging and laser optics solutions for defense, homeland security, and industrial applications with locations in Israel and Romania. With OVS market leading advanced infrared and laser optical components, we can offer our customers solutions where we can combine these optics with our other in-house modalities and our interconnect capabilities. This applies for both AMD and industrial applications. In AMD, we expect to have the opportunity to combine infrared optics and RF radar systems to offer customers a highly integrated and very small form factor mission subsystem for unmanned and counter unmanned area systems. Both critical to modernized defense priorities. On top of that, EPIC will add processing capabilities. Optics and processing are the key differentiators in any optical sensing system. Consequently, we expect the potential Combined offerings of EPIC solutions and OVA optics can advance a common strategy moving up the defense value chain and bringing together complementary software-defined radios and infrared capabilities. Both are keys to expanding our role in mission-critical sensing modalities such as surveillance, reconnaissance, communications, and electronic warfare. In industrial, this proposed acquisition provides laser optical subsystems used for shaping laser beams in industrial cutting, welding, and PCB drilling machines. We are very excited for the opportunities ahead. From a financial perspective, the proposed acquisition of OphiOptics is projected to incrementally benefit our financial model by adding more high margin, long cycle business to our mix. Let me go through the financial highlights with you. We are acquiring Ophir Optics Business for an all-cash purchase of $650 million as a carve-out from MKS. The transaction is expected to be funded through a combination of cash on hand and borrowings under TTM's existing revolving credit facility. And at this time, we believe it's important to convey to all our shareholders that we do not have any current incremental needs or plans to come to the financial markets to access capital. On timing, we expect to close this in the second quarter of 2027, subject to regulatory approvals and other customary closing conditions. OV Optics experiencing strong revenue growth and margin expansion, and the transaction is expected to be immediately accretive to our adjusted EBDA margins and our no-gap diluted EPS. The transaction multiple is estimated to be roughly 10 times the expected OVA Optics full year 2027 adjusted EBDA without synergies. TTM's net leverage at closing is expected to be less than two times adjusted last 12 months EBDA and therefore within our targeted leverage range. I'll now move on to an overview of our business highlights from the quarter. Then we'll follow up with a summary on our Q3 2026 financial performance, our Q4 and full year 2026 guidance, and our initial preliminary guidance for 2027. From a demand standpoint, product development with our partners, bookings and backlog, and broader signals in both AI and defense remain strong and are expected to provide very healthy growth momentum for the remainder of this year and as we look in 2027. We interact very closely with our customers and strategic partners and jointly engage in very diligent conversations to plan for the future, make thoughtful investments, and take a disciplined approach to vet our outlook, which we believe provides us with a lot of optimism as will be evidenced in the guidance that Dan will share shortly. We delivered an excellent third quarter of 2026, and as always, I would like to thank our employees for delivering these results. We achieved a sales of $1.2 billion and non-GAAP EPS of $1.46 per diluted share, both above our guidance and both all-time quarterly highs. Sales for consolidated TTM grew 60% year-on-year, reflecting demand strength in our data center and networking end markets driven by AI, while our medical, industrial, and instrumentation sales almost doubled from a year ago. And aerospace and defense end markets experienced very strong double-digit growth. The company's adjusted EVDA margin was 20.1 in the third quarter of 2026, up an impressive 400 basis points year-on-year and over 350 basis points sequentially, reflecting positive mix impacts and operational excellence. Non-GAAP EPS of $1.46 per diluted share was a 118% improvement year-on-year. The aerospace and defense end market represented 34% of third quarter 2026 sales. Sales in the aerospace and defense market grew 21% year-on-year in the third quarter with the vast majority of our facilities performing at strong levels. The sales growth in the defense market continues to be the result of positive tailwinds in defense budgets, our strong strategic program alignment, and key bookings for new and ongoing programs. Our ability to support sustained Long-term growth is also very encouraging and further enabled by our recent strategic acquisitions. Our focus on product innovation is tracking well against our internal roadmaps for many new capabilities, including unique advancements in printed circuit board technologies for materials that enable high frequency in support for all our applications. During the third quarter of 2026, our A&D team's effective execution continued in securing another strong bookings quarter, capturing business related to the service chip surveillance Pi-6 radar, the APS-143 maritime surveillance radar, Golden Dome, and a number of projected priority restricted programs. A&D's book-to-bill ratio was roughly 1.6 for the quarter, which led to total program backlog of 2 billion, a record level up from just under 1.5 billion a year ago. Within our backlog, we are excited to report that we have strong momentum securing new business from new primes as well as restricted programs. Restricted programs are incredibly sticky and very difficult for competitors to try and displace. For the fourth quarter of 2026, we expect this end market to represent approximately 31% of our total sales and continue to deliver both year-on-year and sequential growth. For the full year 2026, we now expect this end market to deliver approximately 20% growth compared to 2025, including contributions from acquired businesses of roughly 80% on an organic basis. Sales in the data center and networking end market represented 41% of third quarter 2026 sales. This end market experienced 115% year-on-year growth in the third quarter, reflecting the strong ramp of our high-technology ampersand asymmetrical printed circuit boards and continued demand strength from data center and networking customers. For the fourth quarter of 2026, We expect this end market to represent approximately 49% of net sales as our end-present boards continue to experience strong uptake at customers. For the full year 2026, we continue to expect sales in this end market to be more than double year-on-year. The medical, industrial, and instrumentation end market represented 18% of the third quarter 2026 sales. This end market saw year-on-year growth of 97% during the third quarter, aided by spice adjustments to fully capture the value add of our technology, in addition to particular demand strength in instrumentation for automated test equipment supporting AI solutions. For the fourth quarter of 2026, we expect the medical, industrial, and instrumentation end market to represent approximately 40% of total sales growing roughly 90% year-on-year. For the full 2026, we now expect sales in this end market to grow nearly 70% year-on-year. Automotive sales represented 7% of global 2026 sales and was up 11% year-on-year. We continue to be very selective in this market to focus on higher value-add products that carry margin profiles consistent with our financial goals. Given conversations with customers, we are seeing additional share opportunities as some competitors reduce their market participation while long-term business cycles are showing signs of migrating back towards our advanced capabilities. For the fourth quarter of 2026, we expect the automotive end market to represent about 6% of total sales, which reflects encouraging double-digit growth as we digitally push out the chalice of supply chain materials. Availability discussed last quarter. For the full year, 2026, we now expect sales in this end market to improve mid-single digits versus our prior expectations for mid-single digit decline year-on-year. The overall book-to-bill was a remarkable 2.1 for the third quarter of 2026, with the commercial reporting segment at 2.5 and the A&D reporting second at 1.6. At the end of the third quarter of 2026, the 90-day backlog, which is subject to cancellations, was 1.3 billion compared to 610 million a year ago, at 111% increase year-on-year. Now, Dan will summarize the financial performance in more detail. Dan? Thanks, Edwin, and good afternoon, everyone.