8-K: TTM Technologies Reports Strong Q2 2024 Results, Driven by Aerospace and Data Center Demand

TTM Technologies announced robust second-quarter 2024 results, highlighted by increased net sales and improved profitability, alongside a positive outlook for the third quarter.

Summary

• TTM Technologies reported net sales of $605.1 million for the second quarter of 2024, up from $546.5 million in the same period last year.
• GAAP net income reached $26.4 million, or $0.25 per diluted share, a significant increase from $6.8 million, or $0.07 per diluted share, in Q2 2023.
• Non-GAAP net income was $40.1 million, or $0.39 per diluted share, compared to $33.0 million, or $0.32 per diluted share, in the prior year's second quarter.
• The company's adjusted EBITDA was $84.6 million, representing 14.0% of sales, compared to $74.7 million, or 13.7% of sales, in Q2 2023.
• Cash flow from operations was a healthy $41.9 million.
• TTM repurchased 1.39 million shares of common stock for $25.1 million at an average price of $18.09 per share.
• The company anticipates closing the refinancing of $346.5 million of a senior secured term loan at a reduced interest rate of SOFR + 2.25% on August 1, 2024.
• For the third quarter of 2024, TTM projects revenues between $580 million and $620 million, and non-GAAP net income per diluted share between $0.37 and $0.43.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to strong financial results, improved profitability, and a positive outlook. The successful debt refinancing and share repurchase program further contribute to the positive tone.

Positives

• TTM Technologies experienced a significant increase in net sales year-over-year.
• The company's GAAP and non-GAAP net income improved substantially compared to the same quarter last year.
• Adjusted EBITDA and margins showed positive growth.
• Strong cash flow from operations allowed for share repurchases and debt refinancing.
• The refinancing of the term loan is expected to result in annual interest savings of approximately $1.7 million.
• The company's performance was driven by strong demand in the Aerospace and Defense and Data Center Computing end markets.
• Non-GAAP EPS was above the guided range.

Negatives

• The company's GAAP results include restructuring charges of $1.036 million in the second quarter of 2024.
• The company is unable to predict with reasonable certainty certain items that may affect a comparable GAAP measure for non-GAAP net income per diluted share.

Risks

• The company's actual results may differ from preliminary results due to the completion of financial closing procedures and other developments.
• Forward-looking statements are subject to risks and uncertainties, including general market and economic conditions, demand for TTM's products, and market pressures on prices.
• The company depends on a small number of customers, which could pose a risk if those relationships change.
• The company's future performance is subject to various factors outside of management's control, including restructuring actions, impairment charges, unusual gains and losses, and tax adjustments.

Future Outlook

TTM estimates Q3 2024 revenues to be in the range of $580 million to $620 million, and non-GAAP net income per diluted share to be in the range of $0.37 to $0.43.

Management Comments

• Revenues were above the guided range, representing the second consecutive quarter of year on year growth due to demand strength in our Aerospace and Defense and Data Center Computing end markets, the latter being driven by generative AI, said Tom Edman, CEO of TTM.
• In addition, cash flow from operations was a healthy $41.9 million enabling us to repurchase stock while maintaining a solid balance sheet with a net leverage ratio of 1.4x.
• Finally, we refinanced our Term Loan B, reducing interest expense going forward, concluded Mr. Edman.

Industry Context

The strong performance in the Aerospace and Defense and Data Center Computing sectors aligns with current industry trends, where these markets are experiencing significant growth. The demand for advanced PCBs in these sectors is increasing due to technological advancements and increased investment.

Comparison to Industry Standards

• TTM's revenue growth of approximately 10.7% year-over-year is a strong result, especially when compared to some of its peers in the PCB manufacturing industry, such as Sanmina and Jabil, which have seen more modest growth in recent quarters.
• The adjusted EBITDA margin of 14.0% is competitive, and is an improvement over the 13.7% in the same quarter last year, indicating improved operational efficiency.
• The company's focus on high-growth sectors like Aerospace and Defense and Data Center Computing, particularly driven by AI, positions it well against competitors who may have a broader but less focused market exposure.
• The successful refinancing of the term loan at a lower interest rate is a positive move, and is better than some competitors who are facing higher borrowing costs in the current economic environment.

Stakeholder Impact

• Shareholders will benefit from the increased profitability and share repurchase program.
• Employees may experience increased job security due to the company's strong performance.
• Customers will benefit from the company's continued investment in technology and manufacturing capabilities.
• Creditors will benefit from the company's improved financial health and reduced debt burden.

Next Steps

• The company will close the refinancing of the senior secured term loan on August 1, 2024.
• TTM will continue to focus on growth in the Aerospace and Defense and Data Center Computing end markets.
• The company will release its Q3 2024 results in the coming months.

Key Dates

Keywords

TTM Technologies, Printed Circuit Boards, PCB, Aerospace and Defense, Data Center Computing, Net Sales, GAAP Net Income, Non-GAAP Net Income, Adjusted EBITDA, Share Repurchase, Debt Refinancing, Financial Results, Earnings, SOFR, Term Loan