Good afternoon. Thank you for standing by. Welcome to the TTM Technologies Inc. Fourth Quarter 2024 Financial Results Conference Call. As a reminder, this conference is being recorded today, February 5, 2025. Sameer Desai, TTM's Vice President of Corporate Development and Investor Relations will now review the TTM's disclosure statement.

Thank you, Sheri. Before we get started, I would like to remind everyone that today's call contains 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. TTM 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. We've also posted on that website a slide deck that we will refer to during our call. I will now turn the call over to Tom Edman, TTM's Chief Executive Officer. Please go ahead, Tom.

Thank you, Sameer. Good afternoon, and thank you for joining us for our fourth quarter and fiscal year 2024 conference call. I'll begin with a review of our business highlights from the quarter and a discussion of our fourth quarter results followed by a summary of our business strategy. Dan Boehle, our CFO will follow with an overview of our Q4 2024 financial performance and our Q1 2025 guidance. We will then open the call to your questions. Highlights of the quarter's financial results are summarized on Slide 3 of the earnings presentation posted on TTM's website. We delivered an excellent quarter and a strong full year in 2024, and I would like to thank our employees for their hard work and contributions in support of those results. In the fourth quarter of 2024, TTM achieved revenues and non-GAAP EPS above the high end of the guided range. Revenues grew 14% year-on-year and represented the fourth consecutive quarter of year-on-year growth due to demand strength from our Aerospace and Defense, Data Center Computing and Networking end markets, the latter two being driven by Generative AI. While the growth in revenues was partially offset by year-over-year declines from our Automotive and Medical Industrial and Instrumentation end markets, we achieved record high revenue in our A&D and Data Center Computing end markets. Overall, the company book-to-bill was 1.09, with the A&D book-to-bill at 1.14. Demand in our Aerospace and Defense market, which was 47% of revenues for the quarter, continues to be strong, and we now have a record program backlog of approximately $1.56 billion. Finally, non-GAAP operating margins were double digit for the second consecutive quarter and reflected continued solid execution. 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. Over the past several years, we have 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. As a result of strategic transactions in the Aerospace and Defense end market through the acquisitions of Anaren and Telephonics, over 50% of our revenues in Aerospace and Defense are now generated from engineered and integrated electronic products, with printed circuit boards contributing less than 50% overall. We have been successfully executing against this strategy, and our Aerospace and Defense and operations teams have steadily improved operating margins. The financial impact of this strategy really began to show in 2024 with revenues for the year up 9.4% and non-GAAP operating margins up 70 basis points. And heading into the first quarter, we expect to see a significant reduction of the normal seasonal impact on non-GAAP operating margins in comparison to the past four years. Another important element of our differentiation strategy is our investment in a new state-of-the-art, highly automated PCB manufacturing facility in Penang, Malaysia to service customers in our commercial end markets. This new facility in Malaysia is supporting customers in markets such as Data Center Computing, Networking and Medical, Industrial and Instrumentation. We continue to make progress ramping volume production as we navigate the necessary customer audits and qualifications. We gathered further momentum in the fourth quarter with solid bookings, and we expect the ramp to continue to accelerate this year. I'd also like to update you on the consolidation of our manufacturing footprint. We previously announced our plan to close three small printed circuit board manufacturing facilities in order to improve total plant utilization, operational performance, customer focus and profitability. During the course of 2023, PCB manufacturing operations in Anaheim and Santa Clara, California and Hong Kong were closed and consolidated into TTM's remaining facilities. We continue to ramp production for the transferred parts at receiving facilities. We also previously announced plans to consolidate two smaller non-PCB integrated electronics facilities in Elizabeth City, North Carolina and Huntington, New York into existing facilities in order to improve efficiencies. As of the end of fiscal year 2024, the closure of Elizabeth City has been completed and the closure of Huntington is expected by the middle of 2025. After these consolidation plans are complete, TTM will operate a total of 22 facilities worldwide. Finally, I would like to update you on the previous announcement of our intent to expand our advanced technology capability for the aerospace and defense market through the construction of a new facility immediately adjacent to our existing Syracuse, New York campus. This new facility will focus on specialized high technology printed circuit board production providing customers with reduced lead-times and a significant increase in domestic capacity for Ultra HDI PCBs in support of increasing national security requirements for high-technology PCBs. We are continuing construction for the new building and expect initial low rate production in 2026. As previously announced we expect the investment for Phase 1 of the proposed project including capital for campus-wide improvements to be in the range of between $100 million to $130 million. We will be receiving support from both Federal and State sources on the order of approximately $52 million subject to certain requirements and contingencies which will serve to offset the initial capital investment and lower operating expenses.

Thanks, Tom, and good afternoon, everyone. I will review our financial results for the fourth quarter that were included in the press release distributed today and are summarized in slide 6 of the earnings presentation posted on our website. For the fourth quarter, net sales were $651 million, compared to $569 million in the fourth quarter of 2023. The 14% year-over-year increase was due to growth in our aerospace and defense, data center computing and networking end markets, partially offset by declines in our automotive; medical industrial and instrumentation end markets. For the full year, net sales were $2.4 billion, compared to $2.2 billion in 2023. The 9% increase was driven by growth in our data center computing and aerospace and defense end markets, partially offset by declines in our automotive; medical industrial and instrumentation and networking end markets. GAAP operating income for the fourth quarter of 2024 was $9 million inclusive of a $32.6 million goodwill impairment charge related to the RF&S Components segment, compared to GAAP operating income for the fourth quarter of 2023 of $34.6 million. On a GAAP basis, net income for the fourth quarter of 2024 was $5.2 million or $0.05 per diluted share, inclusive of a $32.6 million goodwill impairment charge related to the RF&S Components segment. This compares to GAAP net income for the fourth quarter of 2023 of $17.3 million or $0.17 per diluted share. The remainder of my comments will focus on our non-GAAP financial performance. Our non-GAAP performance excludes M&A related costs, restructuring costs, certain non-cash expense items, such as amortization of intangibles, impairment of goodwill, stock compensation, gains on the sale of property and other unusual or unfrequent items. We present non-GAAP financial information to enable investors to see the company through the eyes of management and to facilitate comparisons with expectations and prior periods. Gross margin in the fourth quarter was 20.5% and compares to 21.3% in the fourth quarter of 2023. The year-on-year decrease was due to continued Penang start-up costs, higher employee-related costs, and declines in the Automotive market, partially offset by higher sales volume, particularly in the Data Center Computing and Aerospace and Defense end markets, and improved operational execution. Selling and marketing expense was $18.9 million in the fourth quarter or 2.9% of net sales versus $17.8 million or 3.1% of net sales a year ago. Fourth quarter G&A expense was $40.9 million or 6.3% of net sales compared to $34.9 million or 6.1% of net sales in the same quarter a year ago. In the fourth quarter of 2024, Research and Development was $7.6 million or 1.2% of net sales compared with $7.3 million or 1.3% of net sales in the same quarter last year. Our operating margin in the fourth quarter of 2024 was 10.1%, a 60 basis points decrease from 10.7% in the same quarter last year, due primarily to the decrease in gross margin as I just mentioned. Interest expense was $10.7 million in the fourth quarter of 2024 compared to $12.9 million in the same quarter last year. During the fourth quarter of 2024, there was a $14.1 million foreign exchange gain below the operating income line compared to a $7 million foreign exchange loss in the fourth quarter of 2023. The current year impact was primarily driven by unrealized foreign exchange gains from translation of our China and Malaysia balance sheets from local currency into the U.S. dollar functional currency, which experienced significant appreciation against the local currencies in the fourth quarter. The full year 2024 net impact from foreign exchange gains and losses was a gain of $1.2 million compared to a $3.9 million loss in the prior year. Due to the significant quarterly volatility of unrealized foreign exchange gains and losses driven by the translation of our China and Malaysia balance sheets from local currency into the U.S. dollar functional currency, we have determined it appropriate to remove the unrealized foreign exchange net impact from our non-GAAP financial measures, beginning with our first quarter of 2025. In order to provide our financial statement users with comparative information, we have attached a second schedule to our earnings release that provides restated historical measures of non-GAAP net income, non-GAAP EPS and adjusted EBITDA. In addition, government incentives and interest income totaled $2.4 million, resulting in a net $16.5 million gain or a $0.14 impact to EPS in the current quarter. This compares to a net loss of $3.3 million or a $0.03 negative impact to EPS in the same quarter of last year. Our effective tax rate was 12.3% in the fourth quarter resulting in a tax expense of $8.8 million. This compares to a rate of 4.1% or a tax expense of $1.9 million in the same quarter last year. Fourth quarter 2024 net income was $62.8 million or $0.60 per diluted share. This compares to fourth quarter 2023 net income of $43 million or $0.41 per diluted share. Adjusted EBITDA for the fourth quarter of 2024 was $108.7 million or 16.7% of net sales, compared with fourth quarter 2023 adjusted EBITDA of $80.9 million or 14.2% of net sales. Depreciation for the quarter was $26.5 million. Net capital spending for the quarter was $52.8 million. Cash flow from operations in the fourth quarter of 2024 came in strong at $86.1 million representing more than 13% of net sales. Cash and cash equivalents at the end of the fourth quarter of 2024 totaled $503.9 million. Our net debt divided by last 12 months EBITDA was 1.2 times. Now I will turn to our guidance for the first quarter of 2025. We project net sales for the first quarter of 2025 to be in the range of $600 million to $640 million, and non-GAAP earnings to be in the range of $0.37 to $0.43 per diluted share, which is inclusive of operating costs associated with starting up our Penang facility. EPS forecast is based on a diluted share count of approximately 104.8 million shares, which includes the dilutive effect of outstanding stock options and other stock awards. We expect SG&A expense to be about 9.4% of net sales in the first quarter and R&D to be about 1.1% of net sales. We expect interest expense of approximately $11.2 million and interest income of approximately $2 million. We estimate our effective tax rate will be between 12% and 17%. Further, we expect to record depreciation of approximately $28.1 million, amortization of intangibles of approximately $9.2 million, stock-based compensation expense of approximately $8.9 million, and non-cash interest expense of approximately $0.5 million. Finally, I'd like to announce that we will be participating in the TD Cowen Aerospace and Defense Conference in Arlington, Virginia on February 13; The Citi Industrial Tech and Mobility Conference in Miami on February 20; and the JPMorgan Leveraged Finance Conference in Miami on February 25. That concludes our prepared remarks. Now we'd like to open the line for questions.

Thank you. Our first question will come from William Stein with Truist Securities. Your line is open.

Great. Thank you for taking my questions. First, Tom, I think you talked about smoothing the seasonality in operating margin performance and that is apparently reflected in your Q1 guidance. Can you talk about what's changed that's allowing you to do this? And maybe quantify the effect?

Sure. Let me discuss the changes in the business that have enabled us to do this. The most significant shift has been the improvement in our Aerospace and Defense revenue mix. Over the last six years, we've increased that share from around 25% to 30% to about 46% to 47%. This shift in revenue, along with the consistent performance of our North American facilities and the inclusion of our integrated electronics facilities, has helped us improve the comparison from Q4 to Q1. We still experience some seasonality in A&D; Q4 typically performs better, but the drop-off isn't as severe. Additionally, in 2020, we sold our Mobility business, which was heavily dependent on consumer products and was quite seasonal—performing strongly in Q3 and Q4, but facing significant declines in Q1 and Q2. This made it challenging to manage due to its asset-intensive nature and the seasonal pressures on margins. By selling that business and enhancing our A&D mix, we have focused on strengthening our commercial business-to-business relationships. Although we are influenced by seasonal factors like the Chinese New Year in Asia, the overall demand has been improving consistently. This combination has worked effectively for us. In the past, we would see revenue drops of 15% to 20% in that quarter, but now the consistency has improved significantly as we transition from Q4 to Q1. Dan, do you have anything to add?

I agree with that. Keeping the volumes up will clearly lead to improvements in the margins compared to last year.

Great. As a follow-up, I'm hoping you can give us a bit more detail on Penang. A few quarters ago, you mentioned that the timing to reach breakeven would be pushed out, but I believe you reiterated that it's expected in Q3 or around that time. I'm just hoping you can tell us how much revenue Penang generated in Q4, what is expected in Q1, and the timing to breakeven. Any details you can provide would be appreciated. Thank you.

The Q4 revenue was very small and not significant. As we look towards Q1, we expect it to be in the $4 million to $5 million range, which is a positive start for commercial production. As we increase that production, we'll be addressing the yield curve, especially since these are new parts being introduced. It's encouraging to see this revenue and to note that we are starting to see program intersections take place. We've been awaiting qualifications, and those are coming through, allowing us to register revenue at the facility. This trend will continue throughout the year as we ramp up programs. We are still aiming to reach breakeven around Q3.

Thank you. One moment for our next question. And that will come from the line of Mike Crawford with B. Riley Securities. Your line is open.

Thank you. You talked about strong bookings in Patriot MRAM some others in Aerospace and Defense. Is there a way you could break down the percent of backlog or program backlog of PCB versus Integrated Electronics?

If you examine the backlog levels, they align closely with our revenue mix in Aerospace and Defense, with approximately a 50-50 distribution. As Syracuse becomes part of our operations early next year, we expect to see an increase in PCB revenue, which will balance against the ongoing organic growth in Integrated Electronics. Overall, the backlog is roughly equal between the two segments.

Okay. Thanks, Tom. And I guess, related to that would be potential yield curve effect and margin impact or expense it as you start the LRIP at the new PCB facility in 2026 versus I suppose it would probably be early 2027 when it would start to be running a little bit more smoothly and how that might all affect margins?

I'll let Dan discuss the margins, but let me explain how the process will work for the Syracuse facility. We will closely collaborate with our primary customer there. You'll see the equipment being brought in, and then early next year, we'll start running that equipment as part of the qualification process. Therefore, you won't notice a significant impact until the first part of next year. Keep in mind that the revenue associated with this plan is around $100 million at full production levels. So, it won't significantly contribute to revenue as Penang, especially in the early stages. Dan, do you have any additional comments?

No, I'd just echo that comment there that it's half the size of Penang, and so you won't expect the same level of headwind to the margins. And currently, I mean, we don't give one-year or two-year guidance, but it's going to be minimal impact to 2025. And I would say much less than Penang in 2026 as we ramp up, because of the relative size.

Okay. Thank you. And just final question would be, I know it's not plating as a bottleneck in North America in your high mix facilities, but what are the main bottlenecks there in North America today and might that be similar to what you might expect in Syracuse or not?

That's a good question. The bottlenecks do shift in those types of facilities. Front-end engineering can sometimes face challenges, especially if we receive a lot of orders, which can lead to bottlenecks in that area. Additionally, the drill area and the test area are two key places where we might encounter issues. These areas are typically smaller facilities and often rely on a single piece of equipment or just one backup, which becomes problematic when order volumes increase. The location of these bottlenecks can vary depending on the complexity of the part and the speed required. Currently, we are well-positioned regarding plating capacity in North America, having significantly increased our capacity in recent years. We've been leveraging insights from our commercial operations to guide our equipment purchasing strategy. Our recent expansions in plating capacity allow us to be flexible in our responses. As we develop the Ultra HDI facility in Syracuse, we are specifically designing it to meet the higher demands of plating, as it will need to handle high-layer counts and dense interconnect requirements. If plating is not the bottleneck, we anticipate that drill and test will be the main areas we could struggle with.

Great. Thank you very much.

Thank you. One moment for our next question. And that will come from the line of James Ricchiuti with Needham. Your line is open.

Hi. Good afternoon. This is Chris Grenga on for Jim. I was just wondering, if you could elaborate on the pull-ins that you saw in the Data Center end market? And whether you expect that to be a headwind in the current quarter? Or if strong demand there is going to backfill that pull-in activity you saw in Q4? Thank you.

Sure, Chris. It's going to be a bit of both. As we look at the first quarter, we expect it to be slightly down from the fourth quarter. This is partly due to the pull-in, but also because of the Chinese New Year. While we will have one of our main facilities for Data Center and Networking operational during the holiday, the rest of our facilities in Asia will be closed, affecting our ability to ship additional products. So, it’s a combination of these two factors.

Got it. How are you – now that sort of the contours of the tariff regulations are starting to come into view, how are you approaching that? And I guess what types of conversations are you having with your customers around abating or minimizing the impact of those tariffs?

Yes. So I'm glad the contours are coming into view for you. We're still staying very – trying to stay as close as possible to the situation. And I'll tell you the – so we have a number of scenarios modeled of course internally. And certainly in the case of direct imports of PCBs from China into the US, our customers own those PCBs and it remains a very small portion of our revenue. So an additional 10% tariff there may cause what's left which is – if you look at revenue about 3% last year's revenue that portion may shift. What our customers have done a very good job of is cross-qualifying now with multiple assembly locations. So if they do see tariffs move what we'll see potentially is the ship to will change into another geography. But – and they will at least for a period of time ask us not to ship into a geography that's affected by the tariffs. So that's been – it's actually quite impressive. The flexibility has now been built in from a supply chain resiliency standpoint with the contract manufacturers that we're shipping to. So that's the primary mitigation strategy that our customers are using.

Great. Thank you very much.

Yes. Thank you. Just wanted to again reiterate that to thank everyone for joining us on today's call. And then just to summarize some of the major points that we hit in the call. We did – we delivered strong revenues and growth in Q4, 14% year-on-year, record revenues in Aerospace and Defense in the Data Center Computing markets. Second, we had a second consecutive quarter of double-digit operating margins. Third, we generated a healthy cash flow from operations of 13.2% of sales and we were able to bring our net debt-to-EBITDA leverage down to 1.2 times. So fantastic project there – or progress there from a financial standpoint. And of course, we continue to focus on our strategic initiatives as we bring up our new facility in Penang and complete the construction this year of our facility in Syracuse. So, in closing, I'd just like to thank all of you our employees and our customers of course for your and their continued support as we navigate 2025 going forward. Thank you very much. Goodbye.

Thank you all for participating. This concludes today's program. You may now disconnect.