Analyst Conference Summary

TTM Technologies

conference date: July 29, 2009 @ 1:30 PM Pacific Time
for quarter ending: June 29, 2009 (2nd quarter)

Forward-looking statements

Overview: Net income increased despite some sequential revenue decline.

Basic data (GAAP) :

Revenues were $144.5 million, down 3% sequentially from $149 million and down 16.5% from $173.0 year-earlier.

Net income was $5.9 million, up % sequentially from $1.4 million, but down 35% from $9.1 million year-earlier.

EPS (earnings per share) were $0.14, up % sequentially from $0.03, but down 33% from $0.21 year-earlier.


Q3 revenue expected between $134 and $142 million. GAAP earnings from $0.09 to $0.15 per share. Non-GAAP earnings from $0.14 to $0.20 per share. Non-cash interest expense of $1.4 million.

Conference Highlights:

The rate of decline in revenues flattened in the quarter. Structural and operational improvements allowed for increased profits despite lower revenue. Revenue decline was from the commercial segment.

Gross margin increased to 18.7% from $16.3% in the first quarter. Operating income was $12.2 million, up from $5.0 million in Q1.

Non-GAAP numbers: net income $8.3 million, or $0.19 per share. EBITDA was $18.3 million, up from $11.1 million in Q1.

Cash and short-term investments increased by $25.2 million in the quarter to end at $189.4 million. Convertible senior notes represent a debt of $137.3 million. Cash flow from operations was $27.3 million. $1.8 million for capital expenditures and $5 million for depreciation.

The PCB manufacturing segment had revnues of $122.6 million, down from $132.3 million in Q1. Operating income in this segment was $10.7 million.

Backplane Assembly segment revenues were $29.1 million, up from $24.9 million in Q1, with operating segment income of $2.3 million.

Cost of goods sold was $117.4 million, leaving gross profit of $27.1 million. Operating expenses of $14.9 million included $6.3 million for marketing, $7.7 million for general and administrative, $0.9 million for amortization of intangibles. Interest expense was $2.8 million. Income tax provision was $3.7 million. Restructuring charges were only $48,000.

Stock based compensation expense was $1.6 million. Interest expense is amortization of financing costs and for interest on outstanding convertible debt (at 3.25% per year).

Computer & peripheral market deceased to 10% of sales. Medical and industrial instrumentation market decreased to 9% of sales. Network & communication increased to 36% of sales due to the surge in Chinese orders.

Top five customers (Cisco, Raytheon, Waway (?sp), ITT, and Northup) represented 37% of sales. Only one customer, Northrup, represented more than 10% of sales for the quarter.

Lead times were stable. PCB book to bill was 1.06 at the end of the quarter, which is lower than the current 1.12 for the industry.

Our focus in quick turn segment is in high technology, so we expect it to remain a stable percentage of business.


PCB operating margin up despite lower revenues? Yes, because of reduction of costs from closing the Redmond facility, which is saving $5 million per quarter. Also, we got $7.1 million in sales from Redmond customers which were manufactured at our other facilities.

Guidance factors? Book to bill can be deceptive because a booking may not ship until the next or later quarters. We have a larger defense component in our mix than the industry in general, so our book-to-bill did not decline as much as others, nor is it getting as big of a bounce back. Our shipments, compared to a year ago, are only down about half of the industry average. In Q3 commercial aerospace may be soft, but defense and overall will be stable. We are seeing more activity in networking and communications in North America, but China backplane segment has slowed from the high Q2 rate. Computing expected up slightly. Medical and instrumentation flat to down slightly.

China 3G looking forward? We don't have visibility, we believe we are now in a pause and there is still some upside at some point.

Defense cutbacks? We have a broad set of contracts that come and go. We have some F22 work, which will end in 2010. But we will ramp up on the F35. We also work in combat products like device detection. We are confident in our defense position going forward.

Layer count? Stable. 13.7.

Quick turn %? 11.5%

July? Our booking was certainly above 1 in July.

Pricing? It was up 2% due to more expensive technology mix. We see random pricing pressures, but on average prices are flat.

Cash is most likely to be used for expansion, not for stock buy backs or dividends.

Maybe half of our anticipated Q3 revenue decline is due to normal summer seasonality due to vacations.

In the quarter, lowest bookings were in April with increases both in May and June. July may not be as strong as June, but certainly adequate. We believe August will also have an over one book-to-bill ratio, but August is the slowest month in the quarter. Then it picks up again in September.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2009 William P. Meyers