TTM Technologies Q3 2026 Earnings Call Transcript

TTM Technologies (NASDAQ:TTMI) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.

View the webcast at https://edge.media-server.com/mmc/p/o3yp2849/

Summary

TTM Technologies reported record third-quarter 2026 revenue of over $1.2 billion, a 60% year-over-year increase, driven by strong demand across data center networking, aerospace and defense, and medical, industrial, and instrumentation markets.

The company raised its full-year 2026 revenue guidance to $4.47-$4.49 billion and provided a preliminary 2027 revenue forecast of $6.5-$6.75 billion, indicating continued robust growth expectations.

Strategic initiatives include significant investments in capacity expansion and technology development, particularly in advanced interconnects and ‘up-the-chain’ product solutions, with $1.7 billion planned through 2029.

TTM is actively pursuing geographic expansion and diversification through acquisitions, including recently closed deals such as Switch Technology Group and pending acquisitions like Ophir Optics, expected to enhance A&D capabilities.

The company achieved a record adjusted EBITDA margin of 20.1% in Q3 2026, with non-GAAP EPS reaching $1.46 per diluted share, reflecting operational excellence and favorable product mix.

TTM Technologies plans to fund its capital investments and acquisitions through operating cash flow and existing credit facilities, without the need to access external capital markets.

Full Transcript

OPERATOR

Good day and welcome to TTM Technologies’ third quarter 2026 earnings call. At this time all participants are in a listen-only mode. After the speaker presentation there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 11 again. Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your speaker, Mr. Sean Hannon, Vice President of Investor Relations. Please go ahead.

Sean Hannon (Vice President of Investor Relations)

Greetings, everyone. Welcome and thank you for joining us today. I’m Sean Hannon, Vice President of Investor Relations for TTM. With me on the call are Edwin Roks, our President and Chief Executive Officer, and Dan Boehle, our Executive Vice President and Chief Financial Officer. Before we get started, I’d like to remind everyone that today’s call contains forward-looking statements, including statements related to TTM’s future business outlook. Actual results could differ materially from these forward-looking statements due to one or more risks and uncertainties, including the risk factors we provide in our filings with the Securities and Exchange Commission, which we encourage you to review. These forward-looking statements represent management’s expectations and assumptions based on currently available information.

TTM does not undertake any obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events, or other circumstances, except as required by law. We will also discuss on this call certain non-GAAP financial measures, such as adjusted EBITDA. Such measures should not be considered as a substitute for the measures prepared and presented in accordance with GAAP, and we direct you to the reconciliations between GAAP and non-GAAP measures included in the company’s earnings release, which is available on the investor relations section of TTM’s website at investors.ttm.com. We have also posted on the website an earnings presentation that we will refer to during the call.

Here is Edwin.

Edwin Roks (President & CEO)

Thank you, Sean. Good Good afternoon everyone, and thank you for joining us for our third quarter 2026 conference call. At TTM Technologies we are focused on designing and manufacturing complex, advanced interconnect products and printed circuit boards, in addition to what we term up-the-chain products and solutions such as sophisticated RF modules resulting in subsystems and fully integrated mission systems for communications and sensing purposes.

Core to the design of all our products and solutions, as well as the strategy of our business, is the innovative focus to safely meet next-generation needs for our customers and end markets, particularly regarding SWaP, or size, weight, and power. We believe the future of electronics lies in speed to market, high reliability, and efficient technology integration, and we consequently engage early with our customers—often multiple years in advance as part of their program roadmaps—to ensure this alignment while also enabling optimal management of their complex supply chains.

It continues to be a very successful year for TTM so far. Our third quarter sets another new record with over $1.2 billion in revenue, and we expect to close out the year strong, aided by increased shipments of our M+M product offerings for the data center networking end market, in addition to continuing strong demand for TTM’s aerospace and defense business and product offerings. Proposal activity in our aerospace and defense business remains at all-time highs.

With a record backlog of $2 billion, we already have visibility into roughly 65% of our projected A&D revenue for 2027. Our medical, industrial, and instrumentation and automotive end markets also outperformed our expectation year-to-date. With all our business performing well in 2026 to date, we are increasing our full year 2026 revenue guidance from $4.47 to $4.49 billion. Since our last quarterly earnings call, we have had many exciting developments here at TTM, and we continue to execute our long-term business strategy focused on projected value creation for our customers and shareholders. As we framed at our investor day in May, TTM continues to invest in organic growth opportunities and technological advancements across our product offerings for all our end markets in addition to strategic M&A to enhance our capabilities and add diversification and longer-term structural enhancements.

To that end, we discussed three key strategic directives. First, investment in capacity and innovative technology for advanced interconnect. As previously disclosed in this area, we have invested or committed to invest over $1.3 billion in capacity expansion in the 2025–2029 timeframe across both our data center and networking and aerospace and defense end markets. While our commercial segments are currently the primary targets for these investments, our model has proven over time that our investments in our commercial technology advancements provide critical value to leverage into our A&D offerings as that end market continues to modernize.

Last week we announced an additional $400 million planned investment that is expected to begin in the fourth quarter of 2026 and continue into early 2028, and this would primarily support revenue production focused on the 2028 period. The basis of this initial investment provides critical commercial, data center, and networking end market customer support in their strong demands and roadmap requirements to utilize our unique M+M product approach.

Recall, the majority of our customer business in this market currently is with industry-leading, innovative, established, and technical AI players. We remind investors that our fundamental business model has been, and continues to be, what we discussed at the investor day, and that is to pursue a very disciplined, risk-reduced, brownfield expansion approach for internal organic investments with the expectation to fund these efforts from operating cash without any anticipated need to access our borrowing facilities.

These investments have been given substantial forethought, are purposeful, aligned with our customers, and not simply reactive to the strong demand environment. Our commitment to these investments is driven by our confidence in our projected cash flows supported by our visibility to the anticipated strong demand requirements of our differentiated and advancing technologies. We are also in the early stages of investing in a new innovation center in the Eau Claire, Wisconsin facility, very close to our existing technology center in Chippewa Falls, Wisconsin.

This facility will spearhead our intensifying R&D activities focused on pioneering technological advances such as mSAP, SAP passives, and embedded optics, among other technologies. Second, recall that we are extremely focused on our diversified business model and that, as part of this, we’ve pursued our initial geographic expansion in the European region. In June we announced our intention to acquire two well-established European companies, Switch Technology Group and ILFA, to begin this effort. We’ve since closed the Switch Technology Group acquisition, now called TTM GS Swiss, and we believe we’re nearing the close of ILFA.

On Monday, we announced the planned acquisition of Ophir Optics, which would establish a presence in Israel and Romania. I’ll share some additional comments on Ophir Optics in a few moments. Additionally, we engaged last week in plans to acquire two small but strategic printed circuit board companies under the Merlin PCB Group holding company in the United Kingdom. We are excited that all these transactions are both strategic from a technology and capability standpoint and also in terms of adding international diversification to our business and financial model.

Finally, our third strategic directive is investment in what we call up-the-chain vertical product solutions with focus on communication and sensing. In line with this directive, we acquired EPIC Solutions, which closed on September 30th. We are excited to welcome the EPIC team members into TTM as we continue the integration activities. The announced plan to acquire Ophir Optics also supports the theme of up-the-chain, and both these companies bring a unique set of competencies that will deliver differentiated and high-value solutions to our end markets.

I now provide a few additional comments on the proposed acquisition of Ophir Optics before we move on to discuss our operating results of the quarter. Ophir Optics is a global leader in precision infrared thermal imaging and laser optics solutions for defense, homeland security, and industrial applications, with locations in Israel and Romania. With Ophir’s market-leading advanced infrared and laser optical components, we can offer our customers solutions, and we can combine these optics with our other in-house modalities and our interconnect capabilities.

This applies for both A&D and industrial applications. In A&D, we expect to have the opportunity to combine infrared optics and RF radar systems to offer customers a highly integrated and very small form factor mission subsystem for unmanned and counter-unmanned area systems, both critical to modernized defense priorities. On top of that, EPIC will add processing capabilities. Optics and processing are the key differentiators in any optical sensing system.

Consequently, we expect the potential combined offerings of EPIC Solutions and Ophir Optics can advance a common strategy, moving up the defense value chain and bringing together complementary software-defined radios and infrared capabilities. Both are keys to expanding our role in mission-critical sensing modalities such as surveillance, reconnaissance, communications, and electronic warfare. In industrial, this proposed acquisition provides laser optical subsystems used for shaping laser beams in industrial cutting, welding, and PCB drilling machines.

We are very excited for the opportunities ahead. From a financial perspective, the proposed acquisition of Ophir Optics is projected to incrementally benefit our financial model by adding more high-margin, long-cycle business to our mix. Let me go through the financial highlights with you. We are acquiring Ophir Optics’ business for an all-cash purchase of $650 million as a carve-out from MKS. The transaction is expected to be funded through a combination of cash on hand and borrowings under TTM’s existing revolving credit facility, and at this time we believe it’s important to convey to all our shareholders that we do not have any current incremental needs or plans to come to the financial market to access capital. On timing, we expect to close this in the second quarter of 2027, subject to regulatory approvals and other customary closing conditions.

Ophir Optics is experiencing strong revenue growth and margin expansion, and the transaction is expected to be immediately accretive to our adjusted EBITDA margins and our non-GAAP diluted EPS. The transaction multiple is estimated to be roughly 10 times the expected Ophir Optics full year 2027 adjusted EBITDA without synergies. TTM’s net leverage at closing is expected to be less than 2 times adjusted last 12 months EBITDA, well within our targeted leverage range.

I’ll now move on to an overview of our business highlights from the quarter. Then we’ll follow up with a summary on our Q3 2026 financial performance, our Q4 and full year 2026 guidance, and our initial preliminary guidance for 2027. From a demand standpoint, product development with our partners, bookings and backlog, and broader signals in both AI and defense remain strong and are expected to provide very healthy growth momentum for the remainder of this year and as we look into 2027.

We interact very closely with our customers as strategic partners and jointly engage in very diligent conversations to plan for the future, make thoughtful investments, and take a disciplined approach to vet our outlook, which we believe provides us with a lot of optimism as will be evidenced in the guidance that Dan will share shortly. We delivered an excellent third quarter of 2026, and as always I would like to thank our employees for delivering these results. We achieved sales of $1.2 billion and non-GAAP EPS of $1.46 per diluted share, both above our guidance and both all-time quarterly highs. Sales for consolidated TTM grew 60% year on year, reflecting demand strength in our data center networking end markets driven by AI, while our medical, industrial, and instrumentation sales almost doubled from a year ago and aerospace and defense end markets experienced very strong double-digit growth.

The company’s adjusted EBITDA margin was 20.1% in the third quarter of 2026, up an impressive 400 basis points year on year and over 350 basis points sequentially, reflecting positive mix impacts and operational excellence. Non-GAAP EPS of $1.46 per diluted share was a 118% improvement year on year. The aerospace and defense end market represented 34% of third quarter 2026 sales. Sales in the aerospace and defense market grew 21% year on year in the third quarter, with the vast majority of our facilities performing at strong levels. The sales growth in the defense market continues to be the result of positive tailwinds in defense budgets, our strong strategic program alignment, and key bookings for new and ongoing programs. Our ability to support sustained long-term growth is also very encouraging and further enabled by our recent strategic acquisitions.

Our focus on product innovation is tracking well against our internal roadmaps for many new capabilities, including unique advancements in printed circuit board technologies for materials that enable high frequency in support of all our applications. During the third quarter of 2026, our A&D team’s effective execution continued in securing another strong bookings quarter, capturing business related to surface ship surveillance, SPY-6 radar, the APS-143 maritime surveillance radar, Golden Dome, and a number of projected priority restricted programs.

A&D’s book-to-bill ratio was roughly 1.6 for the quarter, which led to total program backlog of $2 billion, a record level up from just under $1.5 billion a year ago. Within our backlog, we are excited to report that we have strong momentum securing new business from new primes as well as restricted programs. Restricted programs are incredibly sticky and very difficult for competitors to try and displace. For the fourth quarter of 2026, we expect this end market to represent approximately 31% of our total sales and continue delivering both year on year and sequential growth.

For the full year 2026, we now expect this end market to deliver approximately 20% growth compared to 2025, including contributions from acquired businesses of roughly 80% on an organic basis. Sales in the data center and networking end market represented 41% of third quarter 2026 sales. This end market experienced 115% year on year growth in the third quarter, reflecting the strong ramp of our high-technology M+M symmetrical printed circuit boards and continued demand strength from data center and networking customers. For the fourth quarter of 2026, we expect this end market to represent approximately 49% of net sales as our M+M boards continue to experience strong uptake at customers.

For the full year 2026, we continue to expect sales in this end market to be more than double year on year. The medical, industrial, and instrumentation end market represented 18% of the third quarter 2026 sales. This end market saw year on year growth of 97% during the third quarter, aided by price adjustments to fully capture the value-add of our technology in addition to particular demand strength in instrumentation for automated test equipment supporting AI solutions. For the fourth quarter of 2026, we expect the medical, industrial, and instrumentation end market to represent approximately 14% of total sales, growing roughly 90% year on year.

For the full year 2026, we now expect sales in this end market to grow nearly 70% year on year. Automotive sales represented 7% of third quarter 2026 sales and were up 11% year on year. We continue to be very selective in this market to focus on higher value-add products that carry margin profiles consistent with our financial goals. Given conversations with customers, we are seeing additional share opportunities as some competitors reduce their market participation while long-term business cycles are showing signs of migrating back towards our advanced capabilities.

For the fourth quarter of 2026, we expect the automotive end market to represent about 6% of total sales, which reflects encouraging double-digit growth as we digitally push out the challenge of supply chain materials availability discussed last quarter. For the full year 2026, we now expect sales in this end market to improve mid-single digits versus our prior expectations for a mid-single digit decline year on year. The overall book-to-bill was a remarkable 2.1 for the third quarter of 2026, with the Commercial reporting segment at 2.5 and the A&D reporting segment at 1.6. At the end of the third quarter of 2026, the 90-day backlog, which is subject to cancellations, was $1.3 billion compared to $610 million a year ago, a 111% increase year on year. Now Dan will summarize the financial performance in more detail.

Dan Boehle (Chief Financial Officer)

Thanks, Edwin, and good afternoon, everyone. I’ll review our financial results for the third quarter of 2026 that were included in the press release distributed today. Key financial highlights are also summarized in the earnings presentation posted on our website. For the third quarter, net sales were $1.2 billion compared to $753 million in the third quarter of 2025. The 60% year-over-year increase was due to growth across all our end markets and most notably continued strength in data center and networking, medical, industrial and instrumentation, and aerospace and defense.

GAAP operating income for the third quarter of 2026 was $162.3 million compared to GAAP operating income for the third quarter of 2025 of $71.9 million. On a GAAP basis, net income in the third quarter of 2026 was $84.8 million, or $0.79 per diluted share. This compares to GAAP net income for the third quarter of 2025 of $53.1 million, or $0.50 per diluted share. The remainder of my comments will focus on our non-GAAP financial performance. Our non-GAAP performance excludes M&A-related costs, restructuring costs, certain non-cash expense items such as amortization of intangibles, impairment of goodwill, stock-based compensation, gains on the sale of property, unrealized gains or losses on foreign exchange, and other unusual or infrequent items. We present non-GAAP financial information to enable investors to see the company through the eyes of management and to facilitate comparisons with expectations and prior periods.

Gross margin in the third quarter of 2026 was 24.8%, an increase of 330 basis points from 21.5% in the third quarter of 2025. The year-on-year increase was due primarily to higher sales volume and favorable product mix, particularly in the data center and networking and aerospace and defense end markets, in addition to execution improvements at our facility in Penang, which we continue to expect to approach breakeven in the fourth quarter of 2026.

Selling and marketing expense was $23.2 million in the third quarter, or 1.9% of net sales, versus $20.5 million, or 2.7% of net sales, a year ago. Third quarter general and administrative expense was $57.3 million, or 4.8% of net sales, compared to $42.1 million, or 5.6% of net sales, a year ago. Third quarter research and development expense was $9.5 million, for just under 1% of net sales, compared to $6.9 million, or just under 1% of net sales, in the prior year.

Our operating margin in the third quarter of 2026 was 17.4%, a 510 basis point improvement from 12.3% in the same quarter last year. The increase in the period was due both to the improvement in gross margin as well as operating leverage resulting from selling, general, and administrative expense discipline. Adjusted EBITDA was $242.3 million in the third quarter of 2026, a record quarterly adjusted EBITDA margin of 20.1% and up a full 400 basis points year over year.

This compares to adjusted EBITDA of $120.9 million in the third quarter of 2025, with an associated adjusted EBITDA margin of 16.1%. Interest expense was $12.1 million in the third quarter of 2026 compared to $9.9 million in the same quarter last year. Interest and other income was $3.1 million in the third quarter of 2026 compared to $2.5 million in the same quarter last year. Realized foreign exchange loss in the third quarter of 2026 totaled $4.1 million as compared to $1.8 million in the same quarter last year, driven by the weakening of the U.S. dollar. Our effective tax rate was 19.5% in the third quarter of 2026, resulting in tax expense of $38.2 million.

This compares to an effective tax rate of 15% or a tax expense of $12.5 million in the same quarter last year. Third quarter 2026 non-GAAP net income was $157.8 million, or $1.46 per diluted share. This compares to third quarter 2025 non-GAAP net income of $71.0 million, or $0.67 per diluted share. Cash flow provided by operating activities was $154.7 million in the third quarter of 2026, which compares to cash flow provided by operating activities of $141.8 million in the same quarter last year.

Free cash flow in the third quarter of 2026 was $74.8 million as compared to free cash flow of $42.6 million in the third quarter of last year. Now we’ll provide our financial guidance for the fourth quarter 2026, an update to our outlook for the full year of 2026, and an initial preliminary expectation for full year 2027. We project net sales for the fourth quarter of 2026 to be in the range of $1.42 billion to $1.44 billion and non-GAAP earnings to be in the range of $1.77 to $1.83 per diluted share. These projected results include the contributions of recently closed transactions and associated financing.

However, they exclude any contribution or impact from pending acquisitions. Consequently, we now expect full year 2026 sales of approximately $4.47 billion to $4.49 billion and non-GAAP earnings in the range of $4.97 to $5.03 per diluted share. These full year 2026 projections also include the contributions of recently closed transactions and associated financing, but exclude any contribution or impact from pending acquisitions. The fourth quarter 2026 non-GAAP diluted EPS forecast is based on a diluted share count of approximately 107.8 million shares, which includes the dilutive effect of outstanding stock options and other stock awards.

Our expected full year 2026 non-GAAP EPS forecast is based on a diluted share count of 107.5 million shares, similarly including the effect of outstanding stock options and other stock awards. We expect SG&A expense to be approximately 6.7% of net sales in the fourth quarter, and R&D expenditures to be approximately 1% of net sales. We expect interest expense of approximately $33.9 million, interest income of approximately $3.0 million, and realized foreign exchange and other non-operating expenses of approximately $4.7 million.

We estimate our effective tax rate will be between 15% and 19%. Further, we expect to record depreciation of approximately $39.7 million, amortization of intangibles of approximately $12.1 million, stock-based compensation expense of approximately $18.7 million, and non-cash interest expense of approximately $0.9 million. Looking to the preliminary full year 2027 forecast, we are providing our initial net sales forecast to be in the range of approximately $6.5 billion to $6.75 billion, and non-GAAP net income is expected to be in the range of $8.10 to $8.90 per diluted share, based on a diluted share count of 108.1 million shares, including the effect of outstanding stock options and other stock awards.

Our initial 2027 full year forecast includes contributions from recently closed acquisitions and associated financing costs, while excluding any contribution or impact from pending acquisitions. And finally, I’d like to announce that we are scheduled to participate in the Bank of America Leverage Finance Conference in Boca Raton, Florida on December 1st and the UBS TMT Conference in Scottsdale, Arizona on December 2nd. That concludes our prepared remarks. So I’ll turn it back to you, Cherie, for the Q&A session.

OPERATOR

Thank you. As a reminder, to ask a question, please press star-11 on your telephone and wait for your name to be announced. To withdraw your question, press star-11 again. Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. Please stand by while we compile the Q&A roster. And our first question will come from the line of Steven Fox with Fox Advisors. Your line is open.

Steven Fox (Analyst at Fox Advisors)

Hi, good morning. I guess for my first question I was wondering if we could sort of dig into the N M results to date and expectations going forward. Can you give us a sense for how much of the quarter was driven by the new product, where you think you are in terms of ramping yields, et cetera, and then how broad-based the product is expected to be used? I’m just trying to understand how dominant this is becoming within your traditional PCB sales.

And I had a follow up.

Edwin Roks (President & CEO)

Yeah, Steve, good morning. Yes, happy to do that. Our N program will be a substantial part of our data center networking group. As you know, ramp-ups are going really well. It’s currently about 30% of the data center and networking activities and it will grow next year to about 50% of that group. Ramp-up is going really well. We have three major programs. Two of them are doing really well. One of them is, let’s say, a bit moving to the right. This has nothing to do, by the way, with any technical issue, has nothing to do with our performance.

It basically has to do with the program schedule of that customer, which is a normal thing with these big programs. So far we’re getting very, very positive feedback on our N program. There are more N programs coming. I mentioned before this will be five to ten programs all around. So that’s going well. Steve, there will always be a bit of fluctuation in these programs. These programs are so big, so there will always be a bit of fluctuation. There is also a bit of pull forward to Q3. I can tell you some of the things are even enhanced. So that will be a fact. But again, currently about 30% of the data center and networking business, going in the next year to about 50%. So that technology is working really well.

Steven Fox (Analyst at Fox Advisors)

Great, that’s helpful. And then just to be crystal clear on all the M&A you’ve done and how you’re planning to finance it, can you sort of talk about where this leaves you? Like what’s the potential for more M&A once you close all these deals? And just big picture thoughts on balance sheet since you’ve been pretty active in the acquisition market the last few months. Thanks.

Dan Boehle (Chief Financial Officer)

Yes, Steve, this is Dan. I’ll take that. Thanks for the question. Yeah, I think, you know, this, this will be the end of the big stuff for a while. You know, there may be a few little things that, you know, we’ve announced a few that we need to close and they’re, you know, one of those kind of medium size, the other smaller. So we’ll focus on, you know, strengthening our balance sheet, getting our leverage back down. Now we’ve got a lot of strong cash flow coming in.

Next year we’ll have positive free cash flow to continue to fund our capital expenditures as well as start paying down that debt. But in our Q4 guide, you know, so the difference between where we were last quarter and this quarter, we do have two of the businesses that have closed or expected to close in this period or closed right at the end of Q3. And the Q4 will impact, you know, positively on our EBITDA. But we did raise significant debt for the purchase of EPIC as well as to finance the Ophir project that we just announced. So that has an increase of interest expense for about $20 million a quarter.

So that drags on our EPS. And so you look at the change in EPS guidance from last quarter where we are now up from the transactions but then offset by the debt.

Steven Fox (Analyst at Fox Advisors)

Great, that’s really helpful.

OPERATOR

Thank you. One moment for our next question that will come from the line of Will Stein with Truist. Your line is open.

Will Stein (Analyst at Truist)

Thanks for taking my questions. First, I want to recognize and say congratulations on the great results overall. But I want to also recognize that the data center networking end market came about 10% below your prior guidance in Q3. And so I’m hoping you can help us understand what happened there. Was it supply or, you know, like material availability or yield or something else?

Edwin Roks (President & CEO)

Well, good. Good morning. No, none of these things. These things basically have to do with project timing on the customer side. Again, these large customers, these big customers we have, they have multiple programs and there are always fluctuations in these programs. Some of them move to the left, Some of them move a bit to the right. Again, there are no technical issues. Ramp is going well. Yield numbers are where they should be. Again, they have always multiple suppliers. There’s always a bit of, let’s say, everybody has to be in that same window technology-wise. So that’s sometimes hurting us also a bit. But again, two out of these three programs we initially had are doing really well.

The third one is ramping up. Now that will be in ramp-up in the second half of Q4, fully in production in Q1. So that’s going smooth. And it’s, like I said before, there are more NPOZAP programs coming. But again, there will always be a fluctuation, and we always try to be as accurate as possible in our guidance. But again, there are no major issues there. Yeah, sure. In Q3 of the full data center networking business, it was about 30% of our business was based on N+M. So call it, let’s say, 31% of 400 million, something like that. In Q4 we expect about the same percentage, about 30% out of, let’s say, 700 million data center networking forecast. So these are about the numbers. So the ramp-up is going well. Is it exactly the 200 and the 400? No, probably not. It will be slightly more than 200 and slightly below the 400.

But again, like I said, next year it’s about 50% of the full data center and networking business. So things are just fluctuating a bit. But again, no big deal there.

OPERATOR

Thank you. One moment for our next question. And that will come from the line of Mike Crawford with B. Riley Securities. Your line is open.

Mike Crawford (Analyst at B. Riley Securities)

Thank you. Can you give some color on supply availability of key materials like CCL and T-glass, and also how you match any increasing prices with quotes?

Edwin Roks (President & CEO)

Yes, sure. Mark.

Mark

Lead times, let’s say, are in the order of, let’s say, 12 weeks, sometimes a bit longer, sometimes 24 weeks, sometimes even a bit longer, depending on the materials. So far I think we are handling this very well. On the A&D side, I think everything is solid. On the data center networking side, it’s an ongoing activity. Yes, lead times are going up, but these programs are getting bigger, so we have much more visibility on these things. If you look at the costs, yes, the costs are going up, but so far we are very transparent with our customers, and the customers will take these price increases. And it’s like I said, the N is having—if they’re having higher ASPs, so that’s helping us a lot. So price increases, yes, the customers will absorb that.

Mike Crawford (Analyst at B. Riley Securities)

Okay. And then just to follow up, related, the higher ASPs for the N+M. Yeah, we understand that, but would you say that’s higher than corporate average gross margin and, I guess, related, where do you see gross and EBITDA margins progressing throughout 2027?

Edwin Roks (President & CEO)

Yes, yes, yes. These ASPs are going faster than our cost. And that has to do with the complexity of the boards. The complexity is increasing a lot for these boards. So basically it’s all about the value. I rather don’t talk about cost and ASP; I rather think about the value. We’re taking much more value in these data centers and networking configurations. So that’s helping us a lot. It’s about a factor four. If you compare it with, let’s say, conventional architectures, N+M is really adding a lot, let’s say, in complexity.

And of course, the customers are willing to pay for that. Thank you,

Dan Boehle (Chief Financial Officer)

Mike. Maybe I’ll just add, you mentioned about EBITDA. So, yes, our EBITDA margins will be increasing. Our gross margin on that N+M product is significantly higher than our corporate average. And so as that becomes more the mix, our gross margin as well as our EBITDA margins will be increasing, you know, more than 200 basis points in the next year.

Mike Crawford (Analyst at B. Riley Securities)

All right, thank you, Dan.

OPERATOR

One moment for our next question. And that will come from the line of Ruben Roy with Stifel. Your line is open.

Ruben Roy (Analyst at Stifel)

Yes, thank you, Edwin. I wanted to first follow up on Will’s question on the N+M shift. If you think about Q4 and the guide there with 700 million of revenue for DC, how much is that come from acceleration in customer demand versus maybe recovering some of the push to the right in N, if you can start there. Thank you.

Edwin Roks (President & CEO)

Yeah. Hi, Ruben. These are indeed programs and, like I said, they move a bit. It’s, like I said, it’s about 32% of the 670 million in commercial—in, sorry, in C&C; what we call C&C data centers and networking is coming from N+M. Again, these programs are ramping up. These programs are doing well. And again, the feedback is very, very positive from these larger customers that basically more N programs are coming in.

Ruben Roy (Analyst at Stifel)

Okay. And then on the 400 million capacity expansion, sounds like that will be fully operational ’28. Can you talk about what kind of customer volume visibility you have against that increased commitment and are customers committing to programs against that spend? Thank you.

Edwin Roks (President & CEO)

Yeah, yeah, happy to do that. The 400 million is going on top of something we addressed earlier: a 1.2 billion expansion, let’s say over multiple years till 2029. The 400 million is, I would say, more allocated to N+M. So I would say the 400 million is pure N+M, rounding numbers here. You have to think about our brownfield approach. So basically what we’re very good at—and you see it in China, and I gave several examples during the investor meetings—is that we love brownfields.

So basically buildings close to our existing plants we are going to utilize for additional capacity. We do that very, very fast and we can follow the market much, much more accurate. So that’s basically all of that. It’s a lot of equipment, Ruben, which we are installing there to grow our N+M. It’s, like I said, C&C, our data center networking business, 50% of that will be N+M. So that’s going really well. The technology is really doing what it should do.

Ruben Roy (Analyst at Stifel)

Great, thanks, Edwin.

OPERATOR

One moment for our next question. And that will come from the line of Jim Ricchiuti with Needham. Your line is open.

Jim Ricchiuti (Analyst at Needham)

Thank you. Good morning. Hopefully you can hear me okay.

OPERATOR

Yes, Jim, we can hear you.

Jim Ricchiuti (Analyst at Needham)

Great. So I wanted to just ask you about the preliminary 2027 guidance relative—Edwin, relative to your earlier expectations, the growth that you’re expecting now for 2027, how much of that is due to perhaps higher N+M expectations for data center or possibly how much is due to higher organic growth in the A&D business?

Edwin Roks (President & CEO)

Yeah. So if you look at—starting with the numbers, let’s say for this year, the 4.4, 4.5 billion, let’s say, is a 48% growth year over year. Yeah. This is a number we are going to—we’re going to repeat next year. And again, next year we will grow 50%. A substantial part of that growth will be N+M. The interesting thing, Jim, is that all the different end markets are growing. So if you look at our medical, industrial, instrumentation business, it’s growing a lot and it will continue to grow next year. Even if you look at our automotive business, it’s growing year over year, and of course our aerospace and defense business is growing a lot next year. So that’s—it is just a matter that data center network is growing so fast that it doesn’t look like the others are growing, but I can tell you it’s growing over 20%.

Yeah, these are big, big, big numbers. So yes, we are confident with the numbers we predicted for 2027.

Jim Ricchiuti (Analyst at Needham)

Got a follow-up question, relates to the M&A activity. So we have Epiq, other smaller M&A that you’ve done, and the pending Ophir acquisition. If we look out to next year after Ophir closes, how much of the A&D business is going to be non-PCB in nature?

Edwin Roks (President & CEO)

Now, at the moment, if you look at our aerospace and defense, about half of that is what we call up the chain. So our, let’s say, sensing and communication activities. If we look at Epiq and Ophir—by the way, they are very, very complementary. If you look at Epiq, let’s say that’s more the processing, and Ophir—we’re very happy with that one as well—that’s more the optical side. If you have the optical side and, let’s say, the processing under control and you’re sensor-agnostic, you basically can make full sensing systems which are very consistently used, complementary to our radar activity.

So that’s going well. If you look at the numbers, all of our acquisitions—and of course, Ophir only adds, let’s say, the second part of the year because we only close it, let’s say, hopefully in Q2, at the end of Q2. So we have only one half year of Ophir. Then I would say if you add up all these acquisitions, it’s about half a billion in sales of the 6.75, 6.5 for next year. So that’s about the ratio.

Jim Ricchiuti (Analyst at Needham)

Got it. Thank you.

OPERATOR

Okay, thank you. One moment for our next question. And we do have a follow-up question from Will Stein with Truist. Your line is open.

Will Stein (Analyst at Truist)

Great, thanks for taking the follow-up. I wanted to ask about Ophir. When we look at the EBITDA multiples cited in your press release and in the seller’s press release, one conclusion is that EBITDA is growing very significantly, or you expect it to grow very significantly from ’26 to ’27. What’s driving that? Is that backlog that’s already in place, or is that stuff that you expect to get design wins after the close? Any color to sort of explain this.

Edwin Roks (President & CEO)

Yeah, yes, yes, a very good question. And yes, you get it yourself. The thing is, if you look at the bookings for 2027, Ophir is 85% booked, with new things coming in, by the way. They have a tendency that they always beat that forecast, by the way. So ’27, 85% booked. The 10.3 we addressed as being the multiple—EBITDA over the price we pay—is probably even a bit more conservative. We did, I think, a very, very, very nice deal for us, around 10 times.

So we’re very happy with that. And it’s, like I said, the synergies are not taken into the business case at all, but the synergies will be huge because this is giving us the optical system. We have the processing. We can be sensor-agnostic. That basically means we can make a full optical system. So it’s a very nice acquisition for us.

Will Stein (Analyst at Truist)

And then as a follow-up, you’ve now given us a preliminary view on 2027. Normally when you have guided revenue, you’ve given us some breakdown by end market. I wonder if you’re willing to do that in this case for ’27, how we should think about each end market as a percentage of revenues.

Edwin Roks (President & CEO)

It’s a bit early for that, Will, but of course we will provide more color. Again, only a few quarters ago we gave, let’s say, forecast for the next quarter. Now, let’s say, we are giving a bit more guidance for the full year. You have an idea what our data center networking business is doing, how our areas in defense business will do better and better, let’s say, looking at the munitions side, looking at the golden dome side, a lot of radar. So that will do better and better.

It’s a bit early to give that exact split. We wanted to give some guidance for ’27 and showing that we are maintaining that growth.

Dan Boehle (Chief Financial Officer)

Yeah, well, I think we’ve done that past in the fourth quarter call, and so we will strive to give that. We will be able to get that in the next call.

Will Stein (Analyst at Truist)

Thank you.

OPERATOR

Thank you. I’m showing no further questions in the queue at this time. I’ll turn the call back over to Mr. Edwin Roks for any closing remarks.

Edwin Roks (President & CEO)

Yeah, thank you. This has been a good call. So I thank you. Right, I know, let’s say, with a few items. First of all, we are experiencing very strong growth. We delivered very strong sales growth in Q3 of about 60% year on year, resulting in an all-time high of $1.2 billion for quarterly revenue, driven by increases in our data center, network, medical, industrial, instrumentation, aerospace, and defense markets. Basically, all the markets helped there.

Second, our adjusted EBITDA for the second quarter of 2020 — 0.1% — reflected strong operating improvements and overall performance, leading to another all-time high record in non-GAAP EPS. As a result, 1.46 per diluted share, and expect to continue building on this operating performance in the coming quarters. And third, we continue to generate solid cash flows from operations, which is used to invest in our organic operations, and this supports projected or continued growth. In closing, and I said it before, I would like to thank all our employees of TTM Technologies, our customers, our suppliers, and our shareholders for continued support, and thank you very much. Goodbye.

OPERATOR

Thank you all for participating. This concludes today’s program. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.