TTM Technologies, Inc. (TTMI)

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TTM Technologies, Inc. (TTMI)

Q4 2012 Earnings Call

February 5, 2013 4:30 PM ET


Diane Weiglin – IR

Kent Alder – CEO

Steve Richards – EVP and CFO


Shawn Harrison – Longbow Research

Param Singh – Stifel Nicolaus

Steven Fox – Cross Research

Rich Kugele – Needham & Company

Jiwon Lee – Sidoti & Company

Chelsea Shi – UBS



Good day ladies and gentlemen and thank you for standing by. Welcome to the TTM Technologies Fourth Quarter 2012 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions.

(Operator Instructions) This conference is being recorded today, February 5, 2013.

I’d now like to turn the call over to Diane Weiglin. Please go ahead ma’am.

Diane Weiglin

During the course of this call, the company will make forward-looking statements that relate to future events or performance. These statements reflect the company’s current expectations, and the company does not undertake to update or revise these forward-looking statements, even if experience or future changes make it clear that any projected results expressed or implied in this or other company statements will not be realized.

Furthermore, we wish to caution you that these statements involve risks and uncertainties, many of which are beyond the company’s control, which could cause actual results to differ materially from the forward-looking statements.

These risks and uncertainties include, but are not limited to, the company’s dependence upon the electronics industry, contemplated significant capital expenditures and related financing requirements, the company’s dependence upon a small number of customers, the unpredictability of and potential fluctuation in future revenues and operating results and other risk factors set forth in the company’s most recent SEC filings.

The company also will present non-GAAP financial information in this call. For a reconciliation of TTM’s non-GAAP financial information to the equivalent measures under GAAP, please refer to the company’s press release, which was filed with the SEC and which is posted on TTM’s website.

Participating on today’s call from our Hong Kong office is TTM’s Chief Executive Officer, Kent Alder; and from our Corporate Office in Costa Mesa, California is TTM’s CFO, Steve Richards.

I would now like to turn the call over to Mr. Alder. Please go ahead, Kent.

Kent Alder

Okay. Thank you, Diane. Good afternoon and thanks for joining us for our fourth quarter and fiscal year 2012 conference call. As in our previous calls, I will begin with a review of our business, and Steve will follow with a discussion of our financial performance, then we’ll open the call to your questions.

So let’s start with a review of the highlights from the fourth quarter. Net sales were $382.4 million. Gross margin was 16.3%. Non-GAAP net income was $21.5 million, or $0.26 per diluted share. For the fiscal year 2012, net sales were $1.3 billion; non-GAAP net income was $72 million, or $0.87 per diluted share.

So while we still have more work to do, we were pleased with the close of the year with better than expected revenue and earnings in the fourth quarter. We benefited from increased contributions from our advanced flex – our advanced HDI, flex, rigid-flex business, primarily for touchpad tablets and smartphones. While we did see an improvement in our networking end market, the overall demand environment for conventional printed circuit boards remained choppy.

During the fourth quarter, advanced HDI products represented 29% of our Asia Pacific segment’s revenue, up from 23% last quarter. By capturing multiple new programs for hand-held devices, we significantly expanded our business in HDI, substrate, rigid-flex and flex assembly. These product types accounted for approximately 60% of our Asia Pacific revenue in the fourth quarter, up from 45% in the first quarter of 2011. Achieving this level of progress in growing our advanced technology business is a solid accomplishment and is particularly important given the softer demand for conventional printed circuit boards.

I’d now like to quickly comment on the results of our operating segments for the fourth quarter. And then Steve will answer and provide more details later in the call. The Asia Pacific segment had sales of $259.4 million in the fourth quarter, a 20% increase from the $215.7 million in the third quarter. Gross margin for Asia Pacific was 15.7% in the fourth quarter, compared to 14.6% in the third quarter. The increase in gross margin was primarily due to multiple customer program ramps, which contributed to improved product mix and stabilized our capacity utilization.

Capacity utilization in our advanced HDI facilities in Asia Pacific, during the fourth quarter, was approximately 90%. Utilization for our conventional facilities in Asia Pacific was approximately 65%, and our blended utilization rate across all of our Asia Pacific facilities was 77%.

North America segment recorded fourth quarter sales of $123.9 million, essentially flat with the third quarter. Gross margin for North America increased to 17.4% from 16.8% in the third quarter. The improved gross margin was mainly due to product mix. Our capacity utilization in North America remained consistent with the third quarter, at approximately 65%. On a year-over-year basis, fourth quarter sales in Asia Pacific increased 18.7% from $218.4 million in 2011. In North America, sales decreased 14% from $144 million in 2011.

Now, moving on to our end markets, fourth quarter sales in our largest end market, networking and communications, comprised 30% of our total sales, compared to 29% in the third quarter. Sales in this end market were better than expected and increased sequentially due to improved demand, particularly in Asia Pacific. This is certainly a positive sign, but our visibility into sustained growth in this market is still limited.

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