TTM Technologies, Inc. Reports Fiscal Third Quarter 2019 Results

SANTA ANA, Calif., Oct. 30, 2019 (GLOBE NEWSWIRE) -- TTM Technologies, Inc. (NASDAQ:TTMI), a leading global printed circuit board (“PCB”) and radio frequency (“RF”) components manufacturer, today reported results for the third quarter of fiscal 2019, which ended on September 30, 2019.

Third Quarter 2019 Highlights

Net sales were $716.8 million
GAAP net income was $15.9 million, or $0.14 per diluted share
Non-GAAP net income was $38.9 million, or $0.37 per diluted share
Cash flow from operations of $58.7 million

Third Quarter 2019 Financial Results
Net sales for the third quarter of 2019 were $716.8 million, compared to $755.8 million in the third quarter of 2018 and $633.0 million in the second quarter of 2019.

GAAP operating income for the third quarter of 2019 was $36.4 million, compared to $54.6 million in the third quarter of 2018 and $16.8 million in the second quarter of 2019.

GAAP net income for the third quarter of 2019 was $15.9 million, or $0.14 per diluted share. This compares to income of $27.0 million, or $0.22 per diluted share in the third quarter of 2018, and $3.4 million, or $0.03 per diluted share, in the second quarter of 2019.

On a non-GAAP basis, net income for the third quarter of 2019 was $38.9 million, or $0.37 per diluted share, inclusive of $0.05 of foreign exchange gains. This compares to non-GAAP net income of $55.1 million, or $0.50 per diluted share, for the third quarter of 2018 and $21.3 million, or $0.20 per diluted share, in the second quarter of 2019.

Adjusted EBITDA for the third quarter of 2019 was $103.5 million, or 14.4 percent of net sales, compared to adjusted EBITDA of $122.3 million, or 16.2 percent of net sales, for the third quarter of 2018 and $82.9 million, or 13.1 percent of net sales, for the second quarter of 2019.

“For the third quarter, TTM continued to generate solid cash flow and delivered revenue and earnings within the previously guided range,” said Tom Edman, CEO of TTM. “The year over year growth we experienced in the aerospace and defense and cellular end markets partially offset weakness in our other commercial end markets.”

Business Outlook
For the fourth quarter of 2019 TTM estimates that revenue will be in the range of $640 million to $680 million, and non-GAAP net income will be in the range of $0.25 to $0.31 per diluted share.

“Significant year on year declines from the automotive and networking and communications end markets are a major contributor to lower revenues in the fourth quarter. Consequently, we are exercising discipline in managing our costs and focusing on continued cash flow generation. Longer term, we are confident in our diversification and differentiation strategy and will benefit from secular growth drivers such as 5G wireless technology, increasing automotive electronic content, and ongoing demand strength in aerospace and defense electronics,” concluded Mr. Edman.

To Access the Live Webcast/Conference Call
TTM will host a conference call and webcast to discuss third quarter 2019 results and the fourth quarter 2019 outlook on Wednesday, October 30, 2019, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). The conference call will include forward-looking statements.

Telephone access is available by dialing domestic 800-367-2403 or international 334-777-6978 (ID 1206370). The conference call also will be webcast on TTM’s website at www.ttm.com.

To Access a Replay of the Webcast
The replay of the webcast will remain accessible for one week following the live event on TTM’s website at www.ttm.com.

About TTM
TTM Technologies, Inc. is a leading global printed circuit board manufacturer, focusing on quick-turn and volume production of technologically advanced PCBs, backplane assemblies and electro-mechanical solutions as well as a global designer and manufacturer of RF and microwave components and assemblies. TTM stands for time-to-market, representing how TTM's time-critical, one-stop manufacturing services enable customers to shorten the time required to develop new products and bring them to market. Additional information can be found at www.ttm.com.

Forward-Looking Statements
This release contains forward-looking statements that relate to future events or performance. TTM cautions you that such statements are simply predictions and actual events or results may differ materially. These statements reflect TTM's current expectations, and TTM 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 TTM statements will not be realized. Further, these statements involve risks and uncertainties, many of which are beyond TTM'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, general market and economic conditions, including interest rates, currency exchange rates and consumer spending, demand for TTM's products, market pressures on prices of TTM's products, warranty claims, changes in product mix, contemplated significant capital expenditures and related financing requirements, TTM's dependence upon a small number of customers and other factors set forth in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's public reports filed with the SEC.

About Our Non-GAAP Financial Measures
This release includes information about TTM’s adjusted EBITDA, non-GAAP net income and non-GAAP earnings per share, all of which are non-GAAP financial measures. TTM presents non-GAAP financial information to enable investors to see TTM through the eyes of management and to provide better insight into TTM’s ongoing financial performance.

A material limitation associated with the use of the above non-GAAP financial measures is that they have no standardized measurement prescribed by GAAP and may not be comparable to similar non-GAAP financial measures used by other companies. TTM compensates for these limitations by providing full disclosure of each non-GAAP financial measure and reconciliation to the most directly comparable GAAP financial measure. However, the non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

With respect to the Company’s outlook for non-GAAP net income per diluted share, we are unable to predict with reasonable certainty or without unreasonable effort certain items that may affect a comparable measure calculated and presented in accordance with GAAP. Our expected non-GAAP net income per diluted share excludes primarily the future impact of restructuring actions, impairment charges, unusual gains and losses, and tax adjustments. These reconciling items are highly variable and difficult to predict due to various factors outside of management’s control and could have a material impact on our future period net income per diluted share calculated and presented in accordance with GAAP. Accordingly, a reconciliation of non-GAAP net income per diluted share to a comparable measure calculated and presented in accordance with GAAP is not available without unreasonable effort and has not been provided.

- Tables Follow -

TTM TECHNOLOGIES, INC.
Selected Unaudited Financial Information
(In thousands, except per share data)


				Third Quarter						Second Quarter			First Three Quarters
					2019			2018			2019			2019			2018

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

	Net sales			$	716,817		$	755,837		$	633,038		$	1,970,055		$	2,136,306
	Cost of goods sold				612,983			626,253			548,423			1,692,921			1,801,904

	Gross profit				103,834			129,584			84,615			277,134			334,402

	Operating expenses:
		Selling and marketing			18,400			18,533			17,867			55,168			54,780
		General and administrative			38,845			39,974			34,693			108,561			119,822
		Amortization of definite-lived intangibles			10,175			16,609			11,267			38,268			41,959
		Restructuring charges			53			(82	)		3,944			4,442			1,556
			Total operating expenses		67,473			75,034			67,771			206,439			218,117

	Operating income				36,361			54,550			16,844			70,695			116,285

	Interest expense				(20,568	)		(22,225	)		(20,871	)		(63,127	)		(56,425	)
	Other, net				8,126			2,213			4,621			12,217			7,284

	Income before income taxes				23,919			34,538			594			19,785			67,144
	Income tax (provision) / benefit				(8,049	)		(7,537	)		2,830			(3,743	)		53,958

	Net income			$	15,870		$	27,001		$	3,424		$	16,042		$	121,102

	Earnings per share:
		Basic		$	0.15		$	0.26		$	0.03		$	0.15		$	1.17
		Diluted		$	0.14		$	0.22		$	0.03		$	0.15		$	0.98

	Weighted-average shares used in computing per share amounts:
		Basic			105,492			103,676			105,470			105,092			103,246
		Diluted			132,412			136,435			106,107			106,065			134,871


	Reconciliation of the numerator and denominator used to calculate basic earnings per share and diluted earnings per share:

	Net income			$	15,870		$	27,001								$	121,102
		Add back items: interest expense, net of tax			2,836			3,628									10,763
	Adjusted net income			$	18,706		$	30,629								$	131,865
	Weighted-average shares outstanding				105,492			103,676									103,246
	Dilutive effect of convertible debt				25,938			25,938									25,939
	Dilutive effect of warrants				-			5,226									4,086
	Dilutive effect of performance-based stock units, restricted stock units & stock options				982			1,595									1,600
	Diluted shares				132,412			136,435									134,871
	Earnings per share:
		Basic		$	0.15		$	0.26								$	1.17
		Diluted		$	0.14		$	0.22								$	0.98


SELECTED BALANCE SHEET DATA
				September 30, 2019			December 31, 2018
	Cash and cash equivalents, including restricted cash			$	316,589		$	256,360
	Accounts and notes receivable, net				529,942			523,165
	Contract assets				268,542			287,741
	Inventories				126,324			109,377
	Total current assets				1,277,835			1,206,914
	Property, plant and equipment, net				1,027,868			1,052,024
	Operating lease right of use asset				23,670			-
	Other non-current assets				1,168,985			1,198,565
	Total assets				3,498,358			3,457,503

	Short-term debt, including current portion of long-term debt			$	-		$	30,000
	Accounts payable				470,233			431,288
	Total current liabilities				666,673			673,214
	Debt, net of discount				1,472,578			1,462,425
	Total long-term liabilities				1,584,332			1,557,202
	Total equity				1,247,353			1,227,087
	Total liabilities and equity				3,498,358			3,457,503

SUPPLEMENTAL DATA
				Third Quarter						Second Quarter			First Three Quarters
					2019			2018			2019			2019			2018
	Gross margin				14.5	%		17.1	%		13.4	%		14.1	%		15.7	%
	Operating margin				5.1	%		7.2	%		2.7	%		3.6	%		5.4	%

	End Market Breakdown:
				Third Quarter						Second Quarter
					2019		2018*				2019

		Aerospace/Defense			24	%		21	%		28	%
		Automotive			17	%		15	%		16	%
		Cellular Phone			19	%		17	%		6	%
		Computing/Storage/Peripherals			12	%		14	%		15	%
		Medical/Industrial/Instrumentation			13	%		14	%		15	%
		Networking/Communications			13	%		17	%		17	%
		Other			2	%		2	%		3	%
		* Amended for Anaren integration

	Stock-based Compensation:
				Third Quarter						Second Quarter
					2019			2018			2019
		Amount included in:
			Cost of goods sold	$	941		$	774		$	570
			Selling and marketing		593			520			396
			General and administrative		3,128			4,165			2,636
			Total stock-based compensation expense	$	4,662		$	5,459		$	3,602


	Operating Segment Data:
				Third Quarter						Second Quarter
		Net sales:			2019			2018			2019
		PCB		$	649,104		$	696,356		$	573,121
		E-M Solutions			67,713			59,481			59,917
			Total net sales	$	716,817		$	755,837		$	633,038

		Operating segment income:
		PCB		$	73,230		$	98,039		$	50,989
		E-M Solutions			3,236			2,205			863
		Corporate			(28,750	)		(26,920	)		(22,561	)
			Total operating segment income		47,716			73,324			29,291
		Amortization of definite-lived intangibles			(11,355	)		(18,774	)		(12,447	)
			Total operating income		36,361			54,550			16,844
		Total other expense			(12,442	)		(20,012	)		(16,250	)
		Income before income taxes		$	23,919		$	34,538		$	594

RECONCILIATIONS ¹
				Third Quarter						Second Quarter			First Three Quarters
					2019			2018			2019			2019			2018
	Non-GAAP gross profit reconciliation ² :
		GAAP gross profit		$	103,834		$	129,584		$	84,615		$	277,134		$	334,402
		Add back item:
			Inventory markup		-			-			-			-			4,900
			Amortization of definite-lived intangibles		1,180			2,165			1,180			3,539			2,165
			Stock-based compensation		941			774			570			2,216			2,132
		Non-GAAP gross profit		$	105,955		$	132,523		$	86,365		$	282,889		$	343,599
		Non-GAAP gross margin			14.8	%		17.5	%		13.6	%		14.4	%		16.1	%

	Non-GAAP operating income reconciliation ³ :
		GAAP operating income		$	36,361		$	54,550		$	16,844		$	70,695		$	116,285
		Add back items:
			Amortization of definite-lived intangibles		11,355			18,774			12,447			41,807			44,124
			Stock-based compensation		4,662			5,459			3,602			12,190			14,948
			Inventory markup		-			-			-			-			4,900
			Restructuring, acquisition-related, and other charges		1,573			230			4,351			7,027			12,693
		Non-GAAP operating income		$	53,951		$	79,013		$	37,244		$	131,719		$	192,950
		Non-GAAP operating margin			7.5	%		10.5	%		5.9	%		6.7	%		9.0	%

	Non-GAAP net income and EPS reconciliation ⁴ :
		GAAP net income		$	15,870		$	27,001		$	3,424		$	16,042		$	121,102
		Add back items:
			Amortization of definite-lived intangibles		11,355			18,774			12,447			41,807			44,124
			Stock-based compensation		4,662			5,459			3,602			12,190			14,948
			Non-cash interest expense		3,452			3,992			3,467			10,787			10,399
			(Gain) on sale of Viasource		(251	)		-			(235	)		(3,557	)		-
			Inventory markup		-			-			-			-			4,900
			Restructuring, acquisition-related, and other charges		1,573			230			4,351			7,027			13,235
			Income taxes ⁵		2,237			(337	)		(5,789	)		(7,702	)		(73,302	)
		Non-GAAP net income		$	38,898		$	55,119		$	21,267		$	76,594		$	135,406
		Non-GAAP earnings per diluted share		$	0.37		$	0.50		$	0.20		$	0.72		$	1.24

	Non-GAAP diluted number of shares ⁶ :
		Diluted shares			132,412			136,435			106,107			106,065			134,871
		Dilutive effect of convertible debt			(25,938	)		(25,938	)		-			-			(25,939	)
		Non-GAAP diluted number of shares			106,474			110,497			106,107			106,065			108,932

	Adjusted EBITDA reconciliation ⁷ :
		GAAP net income		$	15,870		$	27,001		$	3,424		$	16,042		$	121,102
		Add back items:
			Income tax provision (benefit)		8,049			7,537			(2,830	)		3,743			(53,958	)
			Interest expense		20,568			22,225			20,871			63,127			56,425
			Amortization of definite-lived intangibles		11,355			18,774			12,447			41,807			44,124
			Depreciation expense		41,719			41,092			41,235			124,556			121,165
			Stock-based compensation		4,662			5,459			3,602			12,190			14,948
			(Gain) on sale of Viasource		(251	)		-			(235	)		(3,557	)		-
			Inventory markup		-			-			-			-			4,900
			Restructuring, acquisition-related, and other charges		1,573			230			4,351			7,027			12,693
		Adjusted EBITDA		$	103,545		$	122,318		$	82,865		$	264,935		$	321,399
		Adjusted EBITDA margin			14.4	%		16.2	%		13.1	%		13.4	%		15.0	%

	Free cash flow reconciliation:
		Operating cash flow			58,742			79,992			86,123			181,789			121,370
		Capital expenditures, net			(25,803	)		(35,038	)		(34,741	)		(88,990	)		(116,125	)
		Free cash flow		$	32,939		$	44,954		$	51,382		$	92,799		$	5,245

	¹ This information provides a reconciliation of non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, non-GAAP EPS, and adjusted EBITDA to the financial information in our consolidated condensed statements of operations.

	² Non-GAAP gross profit and gross margin measures exclude amortization of intangibles, stock-based compensation expense and inventory markup.

	³ Non-GAAP operating income and operating margin measures exclude amortization of intangibles, stock-based compensation expense, gain on sale of assets, inventory markup, acquisition-related costs, restructuring and other charges.

	⁴ This information provides non-GAAP net income and non-GAAP EPS, which are non-GAAP financial measures. Management believes that both measures -- which add back amortization of intangibles, stock-based compensation expense, non-cash interest expense on debt (before consideration of capitalized interest), gain on sale of assets, inventory markup, acquisition-related costs, restructuring and other charges as well as the associated tax impact of these charges and discrete tax items -- provide additional useful information to investors regarding the Company's ongoing financial condition and results of operations.

	⁵ Income tax adjustments reflect the difference between income taxes based on a non-GAAP tax rate and a forecasted annual GAAP tax rate.

	⁶ Non-GAAP diluted number of shares used in computing non-GAAP earnings per share excludes the dilutive effect of convertible debt.

	⁷ Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation, amortization of intangibles, stock-based compensation expense, gain on sale of assets, inventory markup, acquisition-related costs, restructuring and other charges. We present adjusted EBITDA to enhance the understanding of our operating results, and it is a key measure we use to evaluate our operations. In addition, we provide our adjusted EBITDA because we believe that investors and securities analysts will find adjusted EBITDA to be a useful measure for evaluating our operating performance and comparing our operating performance with that of similar companies that have different capital structures and for evaluating our ability to meet our future debt service, capital expenditures, and working capital requirements. However, adjusted EBITDA should not be considered as an alternative to cash flows from operating activities as a measure of liquidity or as an alternative to net income as a measure of operating results in accordance with accounting principles generally accepted in the United States of America.

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