TTM Technologies, Inc. (TTMI) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call shows strong financial performance with increased GAAP operating and net income, and a 15% adjusted EBITDA. Although there are concerns about the breakeven timeline in Malaysia and cost competitiveness in Eau Claire, the company's strong revenue growth, operating margin improvement, and optimistic guidance for Q2 revenue and EPS are positive indicators. The defense sector's growth and customer diversification in the data center segment further bolster confidence. Given the market cap, these factors collectively suggest a positive stock price movement in the next two weeks.
Key Financial Performance
Revenue $730.6 million, a 21% year-over-year increase due to growth in aerospace and defense, data center computing, networking, and medical, industrial, and instrumentation end markets, partially offset by a slight decline in the automotive end market.
Non-GAAP Operating Margins 11.1%, up 210 basis points year-over-year, reflecting continued solid execution and the fourth consecutive quarter of double-digit operating margin performance.
Non-GAAP EPS $0.58, a quarterly record for TTM, taking into account adjustments for unrealized foreign exchange gains.
Cash Flow from Operations 13.4% of revenues, with net leverage ending the quarter at 1.2x.
Aerospace and Defense Revenue $327.6 million, a 21% year-over-year increase, driven by positive tailwinds in defense budgets, strategic program alignment, and key bookings for ongoing franchise programs.
Data Center Computing Revenue 21% of total sales, a 20% year-over-year growth, attributed to strength from data center customers building products for generative AI applications.
Medical/Industrial/Instrumentation Revenue 15% of total sales, a 28% year-over-year growth, driven by increased demand in robotics and automated test equipment for generative AI applications.
Automotive Revenue 11% of total sales, a slight year-over-year decline due to continued inventory adjustments and soft demand at several customers.
Networking Revenue 8% of total sales, a 52% year-over-year growth, driven by increased switch-related demand from certain networking customers.
GAAP Operating Income $61.8 million, compared to $39 million in the second quarter of 2024, reflecting higher sales volume and improved operational execution.
GAAP Net Income $41.5 million or $0.40 per diluted share, compared to $26.4 million or $0.25 per diluted share in the second quarter of 2024.
Adjusted EBITDA $109.7 million or 15% of net sales, compared to $84.6 million or 14% of net sales in the second quarter of 2024.
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Operating Highlights
Generative AI applications: TTM announced the acquisition of a 750,000 square foot facility in Eau Claire, Wisconsin to support high-volume U.S. production of advanced technology PCBs for generative AI applications.
New facilities in Penang and Syracuse: Progress continues on customer qualifications in Penang, with revenues increasing to $5.2 million in Q2. However, breakeven revenue levels of $30-$35 million per quarter are yet to be achieved. A second facility in Malaysia is planned to meet customer demand. The Syracuse facility is nearing completion of external construction, with volume production expected in the second half of 2026.
Aerospace and defense: Revenue grew 21% year-on-year, representing 45% of total revenues. The program backlog is approximately $1.46 billion, with significant bookings for SABER and LTAMDS-related programs. NATO and U.S. defense spending increases provide additional growth opportunities.
Data center computing: Revenue grew 20% year-on-year, representing 21% of total sales. Growth is driven by generative AI applications, with expectations for this segment to grow to 24% of Q3 sales.
Networking: Revenue grew 52% year-on-year, driven by increased switch-related demand and AI-related products.
Operational efficiencies: Non-GAAP operating margins improved to 11.1%, up 210 basis points year-on-year. Cash flow from operations was 13.4% of revenues, and net leverage ended at 1.2x.
Geopolitical and tariff strategies: TTM has diversified its end markets and manufacturing footprint, reducing exposure to tariffs. Investments in U.S. and Malaysian facilities align with customer demand for supply chain diversification.
Defense spending alignment: TTM is well-positioned to benefit from increased U.S. and NATO defense budgets, with a focus on radar systems and missile defense programs.
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Risk or Challenges
Geopolitical Environment: Potential indirect impacts from tariffs, such as overall end market demand weakness and economic slowdown, though no significant short-term impact has been observed yet.
Penang Facility Ramp-Up: Slower-than-expected revenue ramp at the Penang facility, delaying breakeven revenue levels of $30 million to $35 million per quarter. This is attributed to growing pains in a greenfield start-up manufacturing complex multilayer products.
Automotive Market: Slight year-over-year decline in automotive sales due to continued inventory adjustments and soft demand at several customers.
Defense Market Book-to-Bill Ratio: Aerospace and Defense (A&D) segment's book-to-bill ratio below 1 (0.69), attributed to order timing, though demand remains healthy.
Supply Chain and Equipment Installation: Potential risks in the timing of equipment installation at the new Eau Claire, Wisconsin facility, which is closely tied to customer end demand.
Economic Slowdown: Possible indirect impact of economic slowdown on end market demand, though not currently observed.
Penang Facility Expansion: Uncertainty in timing for construction of a second facility in Malaysia, which depends on longer-term customer demand.
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Guidance & Outlook
Revenue Projections: Net sales for Q3 2025 are projected to be in the range of $690 million to $730 million.
Earnings Per Share (EPS): Non-GAAP earnings for Q3 2025 are expected to range between $0.57 and $0.63 per diluted share.
Capital Expenditures: Net capital spending for Q2 2025 was $60.2 million, with ongoing investments in facilities such as Penang and Syracuse to support future growth.
Market Trends and Growth: The aerospace and defense market is expected to represent about 43% of Q3 sales, with continued strong demand. Data center computing revenues are projected to grow, representing 24% of Q3 sales, driven by generative AI applications. The medical/industrial/instrumentation market is expected to contribute 15% of Q3 revenues, while the automotive market is projected to decline slightly to 10% of Q3 revenues. Networking is expected to remain strong, contributing 8% of Q3 revenues.
Facility Expansions: The Penang facility is expected to continue ramping up revenues in Q4 2025, though breakeven levels of $30 million to $35 million in quarterly revenue are not yet certain. A second facility in Malaysia is planned, with construction timing aligned to customer demand. The Syracuse facility is on track for volume production in the second half of 2026.
Defense Spending: Increased U.S. defense budgets and NATO's commitment to higher defense spending are expected to provide long-term growth opportunities, particularly in radar systems and missile defense programs.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Did you provide a timeline for the new capacity in Wisconsin? Was the investment decision driven by customer requests, and if so, which market verticals?
A:Thomas Edman explained that the Eau Claire facility is being prepared for future customer engagement around U.S. capacity requirements, driven by the National Defense Authorization Act and discussions on supply chain resiliency. However, no definitive plans have been laid out yet. The facility is modular, with 700,000+ square feet divided into three modules, ready for equipment installation when customer commitments are secured.
Q:How much of a concern is the slippage in Malaysia's breakeven timeline, and does it impact competitive position or near-term growth in the data center business?
A:Thomas Edman stated that the slippage does not impact their competitive position, as they have a significant head start. Challenges in Malaysia include longer-than-expected qualifications and training for personnel, which affects yield performance. The ramp pace has been slowed to optimize yields, but they are still scaling up, with $5.2 million last quarter and a linear increase expected.
Q:What is the status of incremental capacity in China, and can additional capacity for data centers be added this year?
A:Thomas Edman confirmed that they have scaled their Dongguan facility and qualified their Guangzhou facility, adding 20% additional capacity for the data center area. They continue to qualify additional programs in Guangzhou and expand capacity in Dongguan, particularly for newer technologies like asymmetric designs.
Q:Can you provide an update on customer diversification in the data center segment and how it might trend into 2025 and 2026?
A:Thomas Edman mentioned that they are well-diversified in the data center segment, with a focus on balancing capacity for core customers while adding incremental capacity for newer customers. They are in good shape with most of the major hyperscalers and are expanding capabilities in Guangzhou and Penang to service additional customers.
Q:How do the new segments overlap with products like printed circuit boards, Anaren components, and Telephonics systems?
A:Thomas Edman explained that the Commercial segment primarily consists of printed circuit boards, while the Aerospace and Defense segment is about 50% printed circuit boards and 50% integrated electronics, including mission systems, microelectronics, RF microwave business, and assembly for defense.
Q:Were the high incremental operating margins in the quarter driven more by pricing, units, or mix?
A:Daniel Boehle stated that the high incremental operating margins were primarily driven by mix, with some contribution from high ASPs and a smaller impact from increased units.
Q:What is the capacity and expansion plan for Penang, and what does the new land purchase signify?
A:Thomas Edman stated that the first phase of Penang has a capacity of approximately $200 million, with Phase 2 adding an incremental 20%. The new land purchase is for a multistory building to ensure long-term expansion opportunities, as Penang is becoming a popular location for companies.
Q:What are the investment plans for Wisconsin, and what is the expected capacity for Syracuse?
A:Thomas Edman mentioned that Syracuse is expected to have a capacity of $115-$125 million, with initial production in the second half of next year. Investment plans for Wisconsin are not yet defined, as they depend on customer commitments.
Q:What is the margin drag in Penang, and has it changed?
A:Daniel Boehle stated that the margin drag in Penang has increased to about 210 basis points, up from 170 basis points year-over-year.
Q:What is the cost competitiveness of the Eau Claire facility compared to Penang or China, and what is the customer appetite for higher costs?
A:Thomas Edman explained that even with automation, the Eau Claire facility will have a substantial cost difference, with pricing at least 50% higher than in China. Customer appetite for higher costs depends on their commitment to ensuring some level of U.S. capacity.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer regarding the specific timeline for the new capacity in Wisconsin, stating that no definitive plans have been laid out yet. Additionally, they did not provide detailed investment plans for Wisconsin, as these depend on customer commitments.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AD backlog
AD market
AI application
China facility
Claire Wisconsin
Directors
Eau Claire
Executive
Golden Dome
LTAMDS program
Page presentation
President CEO
Securities Inc
acceleration
consumer
defense contractor
defense spending
end demand
facility term
gigawatt
installation
land
level
market center
market record
missile
networking instrumentation
non
priority
reconciliation bill
segment book
segment demand
shift
successor
supply chain
tariff
timing
TTMI Transcript
TTM Technologies, Inc. (TTMI) Q1 2026 Earnings Call Transcript
Unknown4-29
The earnings call highlights negative financial performance with a year-over-year decline in revenue, gross margin, net income, adjusted EBITDA, and operating cash flow. The lack of discussion on operational updates, strategic initiatives, or returns, coupled with a decrease in financial metrics, suggests a negative sentiment. The forward-looking statement's caution about risks and uncertainties further supports a negative outlook. Given the company's small-cap status, the stock is likely to react negatively, resulting in a predicted stock price movement between -2% and -8% over the next two weeks.
TTM Technologies, Inc. (TTMI) Q4 2025 Earnings Call Transcript
Positive2-4
The earnings call shows strong financial performance, with improved gross and operating margins, and significant growth in key sectors like data center computing and networking. Guidance is optimistic, with plans for expansion and increased capacity, particularly in China and Syracuse. The Q&A reveals management's focus on strategic growth and risk management, despite some unclear responses. The positive sentiment is further supported by the market cap, suggesting a likely stock price increase in the range of 2% to 8% over the next two weeks.
TTM Technologies, Inc. (TTMI) Q3 2025 Earnings Call Transcript
Positive10-29
The earnings call indicates strong financial performance with a 22% YoY net sales increase and improved operating income. Despite a slight gross margin decline, the company is making strategic investments in facilities and R&D. The Q&A reveals confidence in capacity and strategic direction, with improved margin forecasts. The aerospace, defense, and data center markets show strong growth, and management's focus on qualitative growth and cash generation is positive. Considering the market cap, the stock price is likely to see a positive movement (2% to 8%) over the next two weeks.
TTM Technologies, Inc. (TTMI) Q2 2025 Earnings Call Transcript
Positive7-30
The earnings call shows strong financial performance with increased GAAP operating and net income, and a 15% adjusted EBITDA. Although there are concerns about the breakeven timeline in Malaysia and cost competitiveness in Eau Claire, the company's strong revenue growth, operating margin improvement, and optimistic guidance for Q2 revenue and EPS are positive indicators. The defense sector's growth and customer diversification in the data center segment further bolster confidence. Given the market cap, these factors collectively suggest a positive stock price movement in the next two weeks.
TTMI Report
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