Analyst Conference Summary

conference date: May 1, 2012 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2012 (Q1, first quarter)

Forward-looking statements

Overview: Pretty bad quarter. Weak revenues due to weaker demand in telecom market. Despite that, expanded earnings.

Basic data (GAAP) :

Revenues were $300.5 million, down 17% sequentially from $361.5 million and down 12% from $342.8 million in the year-earlier quarter.

Net income was $12.6 million, up 50% sequentially from $8.4 million and up 12% from $11.2 million year-earlier.

EPS (earnings per share) were $0.15, up 50% sequentially from $0.10 and up 7% from $0.14 year-earlier.

Guidance:

Q2 2012 revenue likely between $320 and $340 million, with GAAP EPS $0.10 to $0.19. Non-GAAP EPS $0.18 to $0.27.

Conference Highlights:

Gross margin and net income was in line with guidance despite lower than expected revenue, due to a good product mix and execution. Remains optimistic about the second half of 2012.

Non-GAAP numbers: net income $18.8 million, EPS $0.23, dropping from $31.2 million or $0.38/share in Q4. EBITDA was $46.4 million, down from $60.2 million in Q4. $2.2 million in stock-based compensation expense was excluded. Non-GAAP gross margin was 18.8%

"Advanced HDI PCBs, which are used in high-growth products such as touchpad tablets and smartphones, continued to represent a growing portion of our product mix." Advanced HDI facilities were used at near capacity. Conventional PCB demand in Asia remained soft.

Aerospace/defense represented 17% of revenue. Expects end market to be steady in Q2.

Cellular Phones represented 10% of revenue. Sales decline was seasonal. Expects increase in Q2.

Computing, storage and peripherals were 24% of revenue. Relatively strong sales due to demand at a key customer. Expects slightly down in Q2.

Medical and industrial were 10% of revenue. Relatively strong in Q1, sees as stable percentage

Networking and communications was 32% of revenue. Demand is solid for advanced technology routers, but otherwise week. Expects demand to pick up in Q2.

Other was 7% of revenue. Dropped due to minimal e-reader production after a strong Q4.

Top five customers: Apple, Cisco, Huawei, Juniper, and ZTE. Accounted for 34% of revenue. One customer was >10% of revenue.

Cash and equivalents balance ended at $223.8, up $27.7 million in the quarter. Cash flow from operations $34 million. $306.9 million net debt. $26.6 million capital expenditures. Depreciation $19.1 million.

By region, Asia Pacific represented $171.8 million down from $218.4 in Q4; North America $130.0 million, down from $144.1 million in Q4.

Increasing wages to retain employees while reducing overtime. Will hire about 800 new workers. Will have a negative impact on margins in Asia. Will increase efficiency through greater automation in the future.

Monthly bookings increased in March in North America. Believes 2nd half prospects are strong.

$120 to $130 million will be spent to expand technology capacity in 2012.

Cost of goods sold was $244.0 million, leaving gross profit of $56.5 million. Operating expenses of $34.7 million included $8.6 million for selling and marketing, $22.1 million for general and administrative, and $3.9 million amortization of intangibles. Operating income was $21.8 million. Interest and other expense was $4.8 million. Income tax provision was $4.6 million.

Q&A:

Qualification process for smartphones? We don't talk about specific customers. We are in very good shape, but can't say when new orders will kick in, end of Q2 or beginning of Q3.

Labor inflation in China? There is the annual government wage increase, then the reduced overtime compensation. Long term if turnover goes down it could have a positive impact. This reduction is in response from demands from a couple of our larger customers.

I might add that our employees were happy with the overtime we were giving, the impetus comes from our customers. Basically, we have to give the same pay for fewer hours.

Price concessions from the end customers? We asked them [WPM: probably Apple] for compensation "without too much success."

The other drag on our margins has been the slowness in the conventional PCB market, particularly in telecom. We believe demand will return in the second half of 2012, with some improvement already in Q2.

We believe that the capacity expansion in HDI will result in revenue expansion.

Networking side of telecom? High tech core and edge router business has been strong. Service provider routers and switches have been a bit soft. Telecom part weak.

The advanced HDI technology should spread beyond the smartphone/tablet market over time. About 1/4 of cap ex is going into facilities and environmental, like water recycling.

North America guidance? Aerospace and defense was strong in Q1. But for rest of year we are looking for a y/y flat situation for N. American revenue.

Largest customer % of sales? 13%.

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