Analyst Conference Summary

conference date: February 5, 2014 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2013 (Q4, fourth quarter)

Forward-looking statements

Overview: Mixed picture, but overall sequential improvement.

Basic data (GAAP) :

Revenues were $366.1 million, up 8% sequentially from $338.7 million, but down 4% from $381.7 million in the year-earlier quarter.

Net income was $11.3 million, up sequentially from negative $7.7 million, but down 18% from $13.7 million in the year-earlier quarter.

EPS (earnings per share) were $0.14, up sequentially from negative $0.09, but down 18% from $0.17 year-earlier.

Guidance:

Q1 will be down seasonally due to the smartphone and tablet market. $290 to $310 revenue. $0.03 to $0.09 non-GAAP EPS. Product mix will be unfavorable for margins. Amortization $2.3 million, stock based compensation also $2.3 million. Gross margin around 14% to 14.5%

Conference Highlights:

Revenue was near the high end of prior guidance, while non-GAAP earnings exceeded guidance on strong margins. "Strong demand for our advanced HDI and rigid-flex PCBs used in smartphones, tablets and e-readers in particular drove our product mix shift toward advanced technology PCBs and brought our Asia Pacific factory utilization rates above 90%."

New CEO Tom Edman gave goals: leveraging capabilities to excel in high-tech PCBs for mobile devices, aerospace, and communications. Building on prior structural initiatives for long-term factory utilization and progress in advanced technology. Improving yields and ramp times. A new global ERP system will be implemented. All while keeping SG&A in line.

Computing and smartphone markets were particularly strong, driving the product mix to high end advanced HDI and rigid flex.

Note that on a GAAP basis, eliminating the $2.1 million net loss attributed to noncontrolling interests, net income was down only $0.3 million from Q4 2012. Also, Q4 2012 included $22 million in revenue from the SYE plant, which TTM disposed of in Q2 2013.

Non-GAAP net income was $22.1 million, up 90% sequentially from $11.6 million. EPS was $0.27, up 93% sequentially from $0.14. EBITDA was $58.4 million, sequentially from $42.3 million. Gross margin was 19.2%, up from 14.4% in Q3. Non-GAAP numbers exclude $ million for amortization, $2.2 million stock-based compensation, $ million non-cash interest expense, and $ million in impairment and restructuring charges.

68% of Asian revenue came from HDI, flex, rigid-flex and substrate. $231.6 million total revenue in Asia in the quarter.

Some North American facilities remained underutilized (59%) in Q4. Total revenue was $134.9 million, with 16.8% gross margin.

Aerospace/defense represented 14% from 16% in Q3. Expects Q1 to go back to about 16% of total sales.

Cellular Phones represented up to 24% from 21% in Q3. Expected to fall to 19% of sales in Q1.

Computing, storage and peripherals were 23% of total, up from 19% in Q3. Strong seasonal demand, especially for PCBs for touchpads.

Medical and industrial were 8%, down from 9% in Q3. Expect up to 10% in Q1 on inventory replenishment.

Networking and communications end market was down modestly, 27% of total sales, down from 30% in Q3. This was despite some benefit from 4G LTE rollout in China. Chinese New Year will

Other was 4%, down from 5% in Q3, and back to 5% in Q1.

Top five customers: Amazon, Apple, Cisco, Huawei, and Juniper. They accounted for 47% of sales in quarter. One customer accounted for 29% of sales in the quarter.

ASPs up 15% in Asia from Q4 due to product mix shift. In America just a slight increase

Cash and equivalents ended at $330.6, up $60 million in the quarter. Cap ex $22.8 million. $39.6 million cash from operations. $298.4 million net debt, up $24 million sequentially. Total debt outstanding was $96.2 million short-term and $510.3 million long-term. $23.3 million depreciation.

Cost of goods sold was $295.9 million, leaving GAAP gross profit of $70.2 million. Operating expenses of $40.9 million consisted of: sales and marketing $9.5 million; general and administrative $28.9 million; amortization $2.3 million; and restructuring $0.1 million. Leaving operating income of $29.3 million. Interest expense was $6.0 million. Other income $1.1 million. Income taxes $2.4 million.

Continues to invest in advanced technologies, with capital expenses similar to 2013.

Q&A:

Any plans for diversification of American plants? We are always looking at our footprint and utilization rates. This is for all our segments. Aerospace & defense has complex requirements that can be misleading when you look at utilization. In N. America in networking & communications utilization has been relatively high, but will drop in Q1. Later they should come back up.

In networking and communications in Q1, pulling out SYE, there is growth in the sector. There are good synergies globally in this sector. It is a global market that we service both out of N. America and Asia-Pacific. In Q4 we saw some inventory correction in routers and emerging market weakness, countered by base station demand in China for the 4G rollout.

We would like to move above 70% for utilization in N. America, but it would be challenging because of the mix needs in aerospace & defense.

Computer segment? Y/Y Q1 will be slightly down on tablet demand weakness and storage weakness. This is mainly seasonal.

SG&A expense up from 2012? We estimated $135 million for 2013. It should be similar for 2014, excepting for new investments.

New ERP costs? Somewhere between $15 and $20 million, split between cap ex and operating expense over a 4-year time period. About $2 million of the spend will be in 2014, but we will try to compensate elsewhere to keep SG&A flat.

Visibility in Asia beyond Q1? We expect mobile to start picking up again after Q1. We expect the second half to represent 55% of annual revenue, our usual. We expect increased device complexity, which is good for TTM. There may be challenges in specific regions, but the overall global economy should be positive. Server market likely to continue to be challenging. Overall, we expect modest revenue increases y/y.

ASP pressure is always there for older products, which we try to compensate for by increasing yields on volume products.

There may be good news in defense because of the budget resolution, but we are not forecasting significant growth. We do believe there will be growth during the year in aerospace due to replacing of older equipment.

Confidence in position with Amazon and Apple? We are focused on high-end requirements for smartphones and tablets. That serves multiple customers. We have many more customers for these in addition to the named customers. There are also market share movements within our customer base. Our goal is to gain overall market share.

Convertible debt had a good, low interest rate. Concern would be dilution to current shareholders if the debt was converted to stock. The insurance minimizes dilution, for a modest amount of cash. We improved out capital structure overall with little risk to shareholders.

Wages in China in Q2? The labor inflation of several years ago mitigated. We are figuring on an 8% labor increase. We will raise ASPs and improve yields to compensate.

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