TTM Technologies, Inc. Reports Fiscal Second Quarter 2019 Results - TTM Technologies (NASDAQ:TTMI)

SANTA ANA, Calif., July 31, 2019 (GLOBE NEWSWIRE) -- TTM Technologies, Inc. TTMI, a leading global printed circuit board ("PCB") and radio frequency ("RF") components manufacturer, today reported results for the second quarter of fiscal 2019, which ended on July 1, 2019.

Second Quarter 2019 Highlights

Net sales were $633.0 million
GAAP net income was $3.4 million, or $0.03 per diluted share
Non-GAAP net income was $21.3 million, or $0.20 per diluted share
Cash flow from operations of $86.1 million

Second Quarter 2019 Financial Results
Net sales for the second quarter of 2019 were $633.0 million, compared to $716.9 million in the second quarter of 2018 and $620.2 million in the first quarter of 2019.

GAAP operating income for the second quarter of 2019 was $16.8 million, compared to $31.7 million in the second quarter of 2018 and $17.5 million in the first quarter of 2019.

GAAP net income for the second quarter of 2019 was $3.4 million, or $0.03 per diluted share. This compares to income of $84.0 million, or $0.65 per diluted share in the second quarter of 2018, inclusive of the release of a tax valuation allowance of $74.6 million, and a loss of $3.3 million, or ($0.03) per share, in the first quarter of 2019.

On a non-GAAP basis, net income for the second quarter of 2019 was $21.3 million, or $0.20 per diluted share, inclusive of $0.02 of foreign exchange gains. This compares to non-GAAP net income of $52.3 million, or $0.48 per diluted share, for the second quarter of 2018 and $16.4 million, or $0.16 per diluted share, in the first quarter of 2019.

Adjusted EBITDA for the second quarter of 2019 was $82.9 million, or 13.1 percent of net sales, compared to adjusted EBITDA of $115.9 million, or 16.2 percent of net sales, for the second quarter of 2018 and $78.5 million, or 12.7 percent of net sales, for the first quarter of 2019.

"For the second quarter, TTM continued to generate strong cash flow and delivered earnings at the high end of the previously guided range," said Tom Edman, CEO of TTM. "The year over year growth we are experiencing in the aerospace and defense end market partially offset weakness in our commercial end markets. We see Q2 as the low point of the year and we expect that continued strength in the aerospace and defense market combined with a strong rebound in the cellular end market in Q3 will drive overall revenue growth and improved profitability. At the same time, we will continue to be focused on cash flow generation and our strategic goals of diversification, differentiation and discipline."

Business Outlook
For the third quarter of 2019 TTM estimates that revenue will be in the range of $690 million to $730 million, and non-GAAP net income will be in the range of $0.35 to $0.41 per diluted share.

To Access the Live Webcast/Conference Call
TTM will host a conference call and webcast to discuss second quarter 2019 results and third quarter 2019 outlook on Wednesday, July 31, 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 800-289-0438 or international 323-794-2423 (ID 7407724). 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.

Contact:
Sameer Desai,
Senior Director, Corporate Development & Investor Relations
Sameer.desai@ttmtech.com
714-327-3050

- Tables Follow -

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


				Second Quarter						First Quarter			First Two Quarters
				2019			2018			2019			2019			2018

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

	Net sales			$	633,038		$	716,887		$	620,200		$	1,253,238		$	1,380,469
	Cost of goods sold				548,423			600,747			531,515			1,079,938			1,175,651

	Gross profit				84,615			116,140			88,685			173,300			204,818

	Operating expenses:
		Selling and marketing			17,867			18,619			18,901			36,768			36,247
		General and administrative			34,693			45,721			35,023			69,716			79,848
		Amortization of definite-lived intangibles			11,267			19,489			16,826			28,093			25,350
		Restructuring charges			3,944			577			445			4,389			1,638
			Total operating expenses		67,771			84,406			71,195			138,966			143,083

	Operating income				16,844			31,734			17,490			34,334			61,735

	Interest expense				(20,871	)		(20,453	)		(21,688	)		(42,559	)		(34,200	)
	Other, net				4,621			6,178			(530	)		4,091			5,071

	Income (loss) before income taxes				594			17,459			(4,728	)		(4,134	)		32,606
	Income tax (provision) / benefit				2,830			66,545			1,476			4,306			61,495

	Net income (loss)			$	3,424		$	84,004		$	(3,252	)	$	172		$	94,101

	Earnings per share:
		Basic		$	0.03		$	0.81		$	(0.03	)	$	0.00		$	0.91
		Diluted		$	0.03		$	0.65		$	(0.03	)	$	0.00		$	0.75

	Weighted-average shares used in computing per share amounts:
		Basic			105,470			103,553			104,315			104,893			103,030
		Diluted			106,107			134,721			104,315			105,860			134,088


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

	Net income						$	84,004								$	94,101
		Add back items: interest expense, net of tax						3,587									7,135
	Adjusted net income						$	87,591								$	101,236
	Weighted-average shares outstanding							103,553									103,030
	Dilutive effect of convertible debt							25,938									25,938
	Dilutive effect of warrants							3,854									3,517
	Dilutive effect of performance-based stock units, restricted stock units & stock options							1,376									1,603
	Diluted shares							134,721									134,088
	Earnings per share:
		Basic					$	0.81								$	0.91
		Diluted					$	0.65								$	0.75


SELECTED BALANCE SHEET DATA
				July 1, 2019			December 31, 2018
	Cash and cash equivalents, including restricted cash			$	284,466		$	256,360
	Accounts and notes receivable, net				482,740			523,165
	Contract assets				261,071			287,741
	Inventories				122,149			109,377
	Total current assets				1,189,686			1,206,914
	Property, plant and equipment, net				1,037,087			1,052,024
	Operating lease right of use asset				25,625			-
	Other non-current assets				1,187,715			1,198,565
	Total assets				3,440,113			3,457,503

	Short-term debt, including current portion of long-term debt			$	-		$	30,000
	Accounts payable				432,936			431,288
	Total current liabilities				623,955			673,214
	Debt, net of discount				1,469,270			1,462,425
	Total long-term liabilities				1,587,081			1,557,202
	Total equity				1,229,077			1,227,087
	Total liabilities and equity				3,440,113			3,457,503

SUPPLEMENTAL DATA
				Second Quarter						First Quarter			First Two Quarters
					2019			2018			2019			2019			2018
	Gross margin				13.4	%		16.2	%		14.3	%		13.8	%		14.8	%
	Operating margin				2.7	%		4.4	%		2.8	%		2.7	%		4.5	%

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

		Aerospace/Defense			28	%		23	%		27	%
		Automotive			16	%		19	%		17	%
		Cellular Phone			6	%		8	%		7	%
		Computing/Storage/Peripherals			15	%		15	%		13	%
		Medical/Industrial/Instrumentation			15	%		15	%		15	%
		Networking/Communications			17	%		17	%		18	%
		Other			3	%		3	%		3	%
		* Amended for Anaren integration

	Stock-based Compensation:
				Second Quarter						First Quarter
					2019			2018			2019
		Amount included in:
			Cost of goods sold	$	570		$	829		$	705
			Selling and marketing		396			545			466
			General and administrative		2,636			4,493			2,755
			Total stock-based compensation expense	$	3,602		$	5,867		$	3,926


	Operating Segment Data:
				Second Quarter						First Quarter
		Net sales:			2019			2018			2019
		PCB		$	573,121		$	655,045		$	568,822
		E-M Solutions			59,917			61,842			51,378
			Total net sales	$	633,038		$	716,887		$	620,200

		Operating segment income:
		PCB		$	50,989		$	80,964		$	58,542
		E-M Solutions			863			2,496			1,179
		Corporate			(22,561	)		(32,237	)		(24,226	)
			Total operating segment income		29,291			51,223			35,495
		Amortization of definite-lived intangibles			(12,447	)		(19,489	)		(18,005	)
			Total operating income		16,844			31,734			17,490
		Total other expense			(16,250	)		(14,275	)		(22,218	)
		Income (loss) before income taxes		$	594		$	17,459		$	(4,728	)

RECONCILIATIONS¹
				Second Quarter						First Quarter			First Two Quarters
					2019			2018			2019			2019			2018
	Non-GAAP gross profit reconciliation²:
		GAAP gross profit		$	84,615		$	116,140		$	88,685		$	173,300		$	204,818
		Add back item:
			Inventory markup		-			4,900			-			-			4,900
			Amortization of definite-lived intangibles		1,180			-			1,179			2,359			-
			Stock-based compensation		570			829			705			1,275			1,358
		Non-GAAP gross profit		$	86,365		$	121,869		$	90,569		$	176,934		$	211,076
		Non-GAAP gross margin			13.6	%		17.0	%		14.6	%		14.1	%		15.3	%

	Non-GAAP operating income reconciliation³:
		GAAP operating income		$	16,844		$	31,734		$	17,490		$	34,334		$	61,735
		Add back items:
			Amortization of definite-lived intangibles		12,447			19,489			18,005			30,452			25,350
			Stock-based compensation		3,602			5,867			3,926			7,528			9,489
			Inventory markup		-			4,900			-			-			4,900
			Restructuring, acquisition-related, and other charges		4,351			7,429			1,103			5,454			12,463
		Non-GAAP operating income		$	37,244		$	69,419		$	40,524		$	77,768		$	113,937
		Non-GAAP operating margin			5.9	%		9.7	%		6.5	%		6.2	%		8.3	%

	Non-GAAP net income and EPS reconciliation⁴:
		GAAP net income (loss)		$	3,424		$	84,004		$	(3,252	)	$	172		$	94,101
		Add back items:
			Amortization of definite-lived intangibles		12,447			19,489			18,005			30,452			25,350
			Stock-based compensation		3,602			5,867			3,926			7,528			9,489
			Non-cash interest expense		3,467			3,353			3,868			7,335			6,407
			(Gain) on sale of Viasource		(235	)		-			(3,071	)		(3,306	)		-
			Inventory markup		-			4,900			-			-			4,900
			Restructuring, acquisition-related, and other charges		4,351			7,742			1,103			5,454			13,005
			Income taxes⁵		(5,789	)		(73,073	)		(4,150	)		(9,939	)		(72,965	)
		Non-GAAP net income		$	21,267		$	52,282		$	16,429		$	37,696		$	80,287
		Non-GAAP earnings per diluted share		$	0.20		$	0.48		$	0.16		$	0.36		$	0.74

	Non-GAAP diluted number of shares⁶:
		Diluted shares			106,107			134,721			105,614			105,860			134,088
		Dilutive effect of convertible debt			-			(25,938	)		-			-			(25,938	)
		Non-GAAP diluted number of shares			106,107			108,783			105,614			105,860			108,150

	Adjusted EBITDA reconciliation⁷:
		GAAP net income (loss)		$	3,424		$	84,004		$	(3,252	)	$	172		$	94,101
		Add back items:
			Income tax provision (benefit)		(2,830	)		(66,545	)		(1,476	)		(4,306	)		(61,495	)
			Interest expense		20,871			20,453			21,688			42,559			34,200
			Amortization of definite-lived intangibles		12,447			19,489			18,005			30,452			25,350
			Depreciation expense		41,235			40,298			41,602			82,837			80,073
			Stock-based compensation		3,602			5,867			3,926			7,528			9,489
			(Gain) on sale of Viasource		(235	)		-			(3,071	)		(3,306	)		-
			Inventory markup		-			4,900			-			-			4,900
			Restructuring, acquisition-related, and other charges		4,351			7,429			1,103			5,454			12,463
		Adjusted EBITDA		$	82,865		$	115,895		$	78,525		$	161,390		$	199,081
		Adjusted EBITDA margin			13.1	%		16.2	%		12.7	%		12.9	%		14.4	%

	Free cash flow reconciliation:
		Operating cash flow			86,123			55,639			36,924			123,047			41,378
		Capital expenditures, net			(34,741	)		(38,948	)		(28,446	)		(63,187	)		(81,087	)
		Free cash flow		$	51,382		$	16,691		$	8,478		$	59,860		$	(39,709	)

	¹This 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.

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

	³Non-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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