TTM Technologies, Inc. Reports Fiscal Third Quarter 2018 Results

COSTA MESA, Calif., Oct. 30, 2018 (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 2018, which ended October 1, 2018. The financial results provided below for the third quarter include a full quarter contribution from the acquisition of Anaren, Inc. (“Anaren”), which was completed on April 18, 2018.

Third Quarter 2018 Highlights

Net sales were $755.8 million
GAAP net income was $27.0 million, or $0.22 per diluted share
Non-GAAP net income was $55.1 million, or $0.50 per diluted share
Cash flow from operations of $80.0 million

Third Quarter 2018 Financial Results
Net sales for the third quarter of 2018 were $755.8 million, compared to $666.8 million in the third quarter of 2017 and $716.9 million in the second quarter of 2018.

GAAP operating income for the third quarter of 2018 was $54.6 million, compared to $44.1 million in the third quarter of 2017 and $31.7 million in the second quarter of 2018.

GAAP net income for the third quarter of 2018 was $27.0 million, or $0.22 per diluted share. This compares to $21.5 million, or $0.19 per diluted share, in the third quarter of 2017 and $84.0 million, or $0.65 per diluted share, in the second quarter of 2018.

On a non-GAAP basis, net income for the third quarter of 2018 was $55.1 million, or $0.50 per diluted share. This compares to non-GAAP net income of $33.4 million, or $0.32 per diluted share, for the third quarter of 2017 and $52.3 million, or $0.48 per diluted share, in the second quarter of 2018.

Adjusted EBITDA for the third quarter of 2018 was $122.3 million, or 16.2 percent of net sales, compared to adjusted EBITDA of $85.7 million, or 12.9 percent of net sales, for the third quarter of 2017 and $115.9 million, or 16.2 percent of net sales, for the second quarter of 2018.

“TTM delivered record revenues and earnings for a third quarter,” said Tom Edman, CEO of TTM. “We were pleased to see solid year over year growth from the aerospace and defense, cellular, computing and medical/industrial/instrumentation end markets that more than offset weakness in our automotive end market. Following record third quarter revenues in the cellular end market, we’re anticipating weaker sales and profits in the fourth quarter.”

Business Outlook
For the fourth quarter of 2018 TTM estimates that revenue will be in the range of $720 million to $760 million, and non-GAAP net income will be in the range of $0.44 to $0.50 per diluted share.

To Access the Live Webcast/Conference Call
TTM will host a conference call and webcast to discuss third quarter 2018 results and fourth quarter 2018 outlook on Tuesday, October 30, 2018, 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 800-667-5617 or international 334-323-0509 (ID 9367022). 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 such 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 such 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
					2018			2017			2018			2018			2017

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

	Net sales			$	755,837		$	666,814		$	716,887		$	2,136,306		$	1,919,243
	Cost of goods sold				626,253			569,980			600,747			1,801,904			1,621,523

	Gross profit				129,584			96,834			116,140			334,402			297,720

	Operating expenses:
		Selling and marketing			18,533			16,269			18,619			54,780			48,775
		General and administrative			39,974			30,018			45,721			119,822			90,725
		Amortization of definite-lived intangibles			16,609			5,905			19,489			41,959			17,727
		Restructuring charges			(82	)		100			577			1,556			1,125
		(Gain)/loss on sale of assets			-			452			-			-			(2,348	)
			Total operating expenses		75,034			52,744			84,406			218,117			156,004

	Operating income				54,550			44,090			31,734			116,285			141,716

	Interest expense				(22,225	)		(13,598	)		(20,453	)		(56,425	)		(40,116	)
	Loss on extinguishment of debt				-			(768	)		-			-			(769	)
	Other, net				2,213			(6,984	)		6,178			7,284			(14,518	)

	Income before income taxes				34,538			22,740			17,459			67,144			86,313
	Income tax (provision) / benefit				(7,537	)		(1,205	)		66,545			53,958			(10,902	)

	Net income			$	27,001		$	21,535		$	84,004		$	121,102		$	75,411

	Net income attributable to noncontrolling interest				-			(82	)		-			-			(408	)
	Net income attributable to stockholders			$	27,001		$	21,453		$	84,004		$	121,102		$	75,003

	Earnings per share attributable to stockholders:
		Basic		$	0.26		$	0.21		$	0.81		$	1.17		$	0.74
		Diluted		$	0.22		$	0.19		$	0.65		$	0.98		$	0.65

	Weighted-average shares used in computing per share amounts:
		Basic			103,676			101,814			103,553			103,246			101,501
		Diluted			136,435			131,596			134,721			134,871			131,914


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

	Net income attributable to stockholders			$	27,001		$	21,453		$	84,004		$	121,102		$	75,003
		Add back items: interest expense, net of tax			3,628			3,469			3,587			10,763			10,296
	Adjusted net income attributable to stockholders			$	30,629		$	24,922		$	87,591		$	131,865		$	85,299
	Weighted-average shares outstanding				103,676			101,814			103,553			103,246			101,501
	Dilutive effect of convertible debt				25,938			25,939			25,938			25,939			25,939
	Dilutive effect of warrants				5,226			2,151			3,854			4,086			2,753
	Dilutive effect of performance-based stock units, restricted stock units & stock options				1,595			1,692			1,376			1,600			1,721
	Diluted shares				136,435			131,596			134,721			134,871			131,914
	Earnings per share attributable to stockholders:
		Basic		$	0.26		$	0.21		$	0.81		$	1.17		$	0.74
		Diluted		$	0.22		$	0.19		$	0.65		$	0.98		$	0.65


SELECTED BALANCE SHEET DATA
				October 1, 2018			January 1, 2018
	Cash and cash equivalents, including restricted cash			$	207,952		$	409,326
	Accounts and notes receivable, net				569,215			483,903
	Contract assets				296,836			-
	Inventories				122,232			294,588
	Total current assets				1,233,008			1,221,307
	Property, plant and equipment, net				1,059,246			1,056,845
	Other non-current assets				1,196,972			503,730
	Total assets				3,489,226			2,781,882

	Short-term debt, including current portion of long-term debt			$	40,000		$	4,578
	Accounts payable				451,645			497,455
	Total current liabilities				695,276			720,356
	Debt, net of discount				1,518,315			975,479
	Total long-term liabilities				1,619,039			1,050,146
	Total equity				1,174,911			1,011,380
	Total liabilities and equity				3,489,226			2,781,882

SUPPLEMENTAL DATA
				Third Quarter						Second Quarter			First Three Quarters
					2018			2017			2018			2018			2017
	Gross margin				17.1	%		14.5	%		16.2	%		15.7	%		15.5	%
	Operating margin				7.2	%		6.6	%		4.4	%		5.4	%		7.4	%

	End Market Breakdown:
				Third Quarter						Second Quarter
					2018			2017			2018

		Aerospace/Defense			23	%		16	%		24	%
		Automotive			15	%		20	%		19	%
		Cellular Phone			17	%		17	%		8	%
		Computing/Storage/Peripherals			14	%		14	%		15	%
		Medical/Industrial/Instrumentation			13	%		14	%		14	%
		Networking/Communications			17	%		17	%		17	%
		Other			1	%		2	%		3	%

	Stock-based Compensation:
				Third Quarter						Second Quarter
					2018			2017			2018
		Amount included in:
			Cost of goods sold	$	774		$	606		$	829
			Selling and marketing		520			369			545
			General and administrative		4,165			3,703			4,493
			Total stock-based compensation expense	$	5,459		$	4,678		$	5,867


	Operating Segment Data:
				Third Quarter						Second Quarter
		Net sales:			2018			2017			2018
		PCB		$	698,983		$	609,742		$	657,601
		E-M Solutions			59,481			60,620			61,842
		Corporate			-			-			-
			Total sales		758,464			670,362			719,443
		Inter-segment sales			(2,627	)		(3,548	)		(2,556	)
			Total net sales	$	755,837		$	666,814		$	716,887

		Operating segment income:
		PCB		$	98,039		$	70,443		$	80,964
		E-M Solutions			2,205			2,870			2,496
		Corporate			(26,920	)		(23,318	)		(32,237	)
			Total operating segment income		73,324			49,995			51,223
		Amortization of definite-lived intangibles			(18,774	)		(5,905	)		(19,489	)
			Total operating income		54,550			44,090			31,734
		Total other expense			(20,012	)		(21,350	)		(14,275	)
		Income before income taxes		$	34,538		$	22,740		$	17,459

RECONCILIATIONS ¹
				Third Quarter						Second Quarter			First Three Quarters
					2018			2017			2018			2018			2017
	Non-GAAP gross profit reconciliation ² :
		GAAP gross profit		$	129,584		$	96,834		$	116,140		$	334,402		$	297,720
		Add back item:
			Inventory markup		-			-			4,900			4,900			-
			Amortization of definite-lived intangibles		2,165			-			-			2,165			-
			Stock-based compensation		774			606			829			2,132			1,639
		Non-GAAP gross profit		$	132,523		$	97,440		$	121,869		$	343,599		$	299,359
		Non-GAAP gross margin			17.5	%		14.6	%		17.0	%		16.1	%		15.6	%

	Non-GAAP operating income reconciliation ³ :
		GAAP operating income		$	54,550		$	44,090		$	31,734		$	116,285		$	141,716
		Add back items:
			Amortization of definite-lived intangibles		18,774			5,905			19,489			44,124			17,727
			Stock-based compensation		5,459			4,678			5,867			14,948			13,306
			(Gain)/loss on sale of assets		-			452			-			-			(2,348	)
			Inventory markup		-			-			4,900			4,900			-
			Impairments, restructuring, acquisition-related, and other charges		230			100			7,429			12,693			1,225
		Non-GAAP operating income		$	79,013		$	55,225		$	69,419		$	192,950		$	171,626
		Non-GAAP operating margin			10.5	%		8.3	%		9.7	%		9.0	%		8.9	%

	Non-GAAP net income and EPS attributable to stockholders reconciliation ⁴ :
		GAAP net income attributable to stockholders		$	27,001		$	21,453		$	84,004		$	121,102		$	75,003
		Add back items:
			Amortization of definite-lived intangibles		18,774			5,905			19,489			44,124			17,727
			Stock-based compensation		5,459			4,678			5,867			14,948			13,306
			Non-cash interest expense		3,992			2,699			3,353			10,399			8,052
			(Gain)/loss on sale of assets		-			452			-			-			(2,348	)
			Inventory markup		-			-			4,900			4,900			-
			Loss on extinguishment of debt		-			768			-			-			769
			Impairments, restructuring, acquisition-related, and other charges		230			100			7,742			13,235			1,225
			Income taxes ⁵		(337	)		(2,643	)		(73,073	)		(73,302	)		(7,855	)
		Non-GAAP net income attributable to stockholders		$	55,119		$	33,412		$	52,282		$	135,406		$	105,879
		Non-GAAP earnings per diluted share attributable to stockholders		$	0.50		$	0.32		$	0.48		$	1.24		$	1.00

	Non-GAAP diluted number of shares ⁶ :
		Diluted shares			136,435			131,596			134,721			134,871			131,914
		Dilutive effect of convertible debt			(25,938	)		(25,939	)		(25,938	)		(25,939	)		(25,939	)
		Non-GAAP diluted number of shares			110,497			105,657			108,783			108,932			105,975

	Adjusted EBITDA reconciliation ⁷ :
		GAAP net income		$	27,001		$	21,535		$	84,004		$	121,102		$	75,411
		Add back items:
			Income tax provision (benefit)		7,537			1,205			(66,545	)		(53,958	)		10,902
			Interest expense		22,225			13,598			20,453			56,425			40,116
			Amortization of definite-lived intangibles		18,774			5,905			19,489			44,124			17,727
			Depreciation expense		41,092			37,496			40,298			121,165			109,719
			Stock-based compensation		5,459			4,678			5,867			14,948			13,306
			(Gain)/loss on sale of assets		-			452			-			-			(2,348	)
			Inventory markup		-			-			4,900			4,900			-
			Loss on extinguishment of debt		-			768			-			-			769
			Impairments, restructuring, acquisition-related, and other charges		230			100			7,429			12,693			1,225
		Adjusted EBITDA		$	122,318		$	85,737		$	115,895		$	321,399		$	266,827
		Adjusted EBITDA margin			16.2	%		12.9	%		16.2	%		15.0	%		13.9	%

	Free cash flow reconciliation:
		Operating cash flow			79,992			71,366			55,639			121,370			180,064
		Capital expenditures, net			(35,038	)		(22,877	)		(38,948	)		(116,125	)		(91,881	)
		Free cash flow		$	44,954		$	48,489		$	16,691		$	5,245		$	88,183

	¹ This information provides a reconciliation of non-GAAP gross profit, non-GAAP operating income, non-GAAP net income attributable to stockholders, non-GAAP EPS attributable to stockholders, 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, asset impairments, restructuring and other charges.

	⁴ This information provides non-GAAP net income attributable to stockholders and non-GAAP EPS attributable to stockholders, 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, asset impairments, 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 attributable to stockholders 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, asset impairments, 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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