8-K: TTM Technologies Reports Mixed Q4 Results, Provides Cautious Q1 Outlook

TTM Technologies reported a decrease in net sales for the fourth quarter of 2023 compared to the same period in 2022, but non-GAAP EPS exceeded guidance.

Summary

• TTM Technologies announced its fourth quarter and full year 2023 results, with the fourth quarter ending on January 1, 2024.
• Net sales for Q4 2023 were $569 million, down from $617.2 million in Q4 2022.
• GAAP net income for Q4 2023 was $17.3 million, or $0.17 per diluted share, compared to $6.0 million, or $0.06 per diluted share in Q4 2022.
• Non-GAAP net income for Q4 2023 was $43.0 million, or $0.41 per diluted share, which was the same as Q4 2022.
• Adjusted EBITDA for Q4 2023 was $80.9 million, or 14.2% of sales, compared to $81.6 million, or 13.2% of sales in Q4 2022.
• For the full year 2023, net sales decreased by 11% to $2.2 billion from $2.5 billion in 2022.
• The company reported a GAAP net loss of $18.7 million for 2023, compared to a net income of $94.6 million in 2022.
• Non-GAAP net income for 2023 was $139.5 million, or $1.33 per diluted share, compared to $181.2 million, or $1.74 per diluted share in 2022.
• Adjusted EBITDA for 2023 was $298.2 million, or 13.4% of net sales, compared to $343.1 million, or 13.8% of net sales in 2022.
• TTM estimates Q1 2024 revenues to be between $530 million and $570 million, with non-GAAP net income per diluted share between $0.24 and $0.30.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the better than expected non-GAAP EPS and strong cash flow, but tempered by the overall decrease in sales and GAAP net income, and a net loss for the full year.

Positives

• Non-GAAP EPS exceeded the high end of the guided range in Q4 2023.
• The company had strong cash flow from operations in Q4 2023.
• TTM successfully refinanced its debt, pushing maturities out to 2028.
• The Penang facility is operational and sampling products.
• The company repurchased shares and returned capital to shareholders.

Negatives

• Net sales decreased in both Q4 2023 and for the full year 2023 compared to the previous year.
• GAAP operating income and net income decreased significantly in Q4 2023 and for the full year 2023.
• The company reported a GAAP net loss for the full year 2023.
• There was a $44.1 million goodwill impairment charge related to the RF&S Components segment in 2023.
• Demand softness was experienced in the Automotive and Medical, Industrial and Instrumentation end markets.

Risks

• The company faces challenges in predicting certain items that may affect GAAP measures, making it difficult to provide a reconciliation for non-GAAP guidance.
• The company's future results are subject to various risks and uncertainties, including market conditions, demand for products, and dependence on a small number of customers.
• The preliminary financial results may differ from the final results disclosed in the Form 10-K due to the completion of financial closing procedures and other developments.

Future Outlook

TTM estimates Q1 2024 revenues to be between $530 million and $570 million, with non-GAAP net income per diluted share between $0.24 and $0.30. The company is unable to predict with reasonable certainty certain items that may affect a comparable measure calculated and presented in accordance with GAAP.

Management Comments

• Revenues were within the guided range as upside in our Aerospace and Defense and Data Center Computing end markets was offset by demand softness in our Automotive and Medical, Industrial and Instrumentation end markets, said Tom Edman, CEO of TTM.
• In addition, cash flow from operations was a healthy 8.3% of revenue enabling us to repurchase stock while maintaining a solid balance sheet with a net leverage ratio of 1.6x.
• Finally, our Penang facility has all major processes running and we are currently sampling product to customers, concluded Mr. Edman.
• We delivered solid results in 2023 despite a challenging year.
• Better product mix and execution in North America and Asia Pacific helped to mitigate margin declines, continued Edman.

Industry Context

The results reflect a mixed performance in the technology manufacturing sector, with some end markets showing strength while others experience softness. The company's focus on Aerospace and Defense and Data Center Computing aligns with current industry trends, while challenges in Automotive and Medical sectors highlight the diverse market conditions.

Comparison to Industry Standards

• TTM's adjusted EBITDA margin of 13.4% for 2023 is within the range of other electronics manufacturing services (EMS) companies, but lower than some high-margin PCB manufacturers.
• Companies like Jabil and Flex, which are larger EMS providers, often have higher revenue but may have lower margins due to their broader service offerings.
• Compared to specialized PCB manufacturers like Advanced Circuits or NCAB, TTM's focus on a wider range of technology solutions may result in different financial metrics.
• The company's performance in the Aerospace and Defense sector is a positive differentiator, as this market often provides more stable and higher-margin opportunities compared to consumer electronics.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net sales and GAAP net income, but encouraged by the non-GAAP EPS and share repurchases.
• Employees may be impacted by the company's restructuring efforts and changes in market demand.
• Customers may benefit from the company's focus on innovation and new product development.
• Suppliers may be affected by changes in the company's production volumes and supply chain management.
• Creditors may be reassured by the company's debt refinancing and strong cash flow.

Next Steps

• The company will host a conference call on February 7, 2024, to discuss the results and outlook.
• The company will continue to focus on its strategic end markets and operational improvements.
• The company will continue to sample products from its Penang facility.

Key Dates

Keywords

TTM Technologies, Printed Circuit Boards, PCB, RF Components, Aerospace and Defense, Data Center Computing, Net Sales, EBITDA, Non-GAAP Earnings, Financial Results