Analyst Conference Summary

conference date: February 4, 2015 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2014 (Q4, fourth quarter)

Forward-looking statements

Overview: Strong revenue and earnings growth. Seasonal Q1 guidance. Waiting to merge with Viasystems.

Basic data (GAAP) :

Revenues were $390.9 million, up 13% sequentially from $345.3 million, and up 7% from $366.1 million in the year-earlier quarter.

Net income was $13.9 million, up 80% sequentially from $7.7 million, and up 23% from $11.3 million in the year-earlier quarter.

EPS (earnings per share) was $0.17, up 89% sequentially from $0.09, and up 21% from $0.14 year-earlier.

Guidance:

Q1 revenue expected between $310 and $330 million with non-GAAP EPS between $0.06 and $0.12. Q1 is the seasonally weakest quarter.

[Note Q1 2014 revenue was $292 million, with non-GAAP EPS of $0.01 - WPM]

Conference Highlights:

Demand was strong during Q4, with revenue slightly above guidance and non-GAAP earnings at the high end of the range. Demand was driven by advanced HDI and rigid-flex PCB products for smartphones. Utilization in Asia was strong. Bookings in the cell phone end market remained solid at the beginning of Q1.

Announced in September TTM is buying Viasystems for $11.33 in cash and $0.706 in TTM shares per share of Viasystems common stock, with closure expected in the first half of 2015. A $350 million notes placement was announced after the quarter ended. Believes will be accretive the first year and continues to look at restructuring debt.

Non-GAAP net income was $23.2 million, up 111% sequentially from $11.0 million and up 5% from $22.1 million year-earlier. EPS was $0.28, up 115% sequentially from $0.13 and up 4% from $0.27 year-earlier. Adjusted EBITDA was $60.5 million. Non-GAAP expenses exclude stock-based compensation, etc.

Non-GAAP gross margin was 17.6%.

Advanced technology work accounted for about 51% of revenue, up from 44% in Q3. Advanced technology work represents an area for future revenue and profit growth.

93% utilization in Asia, up sequentially from 80%. $264 million in sales. 18.3% gross margin, up sequentially from 13.6%. $28 million operating income.

47% utilization in North America, down sequentially from 54%. Partly this was due to an increase in plating capacity at the Wisconsin plant. $127.4 million sales. 16.1% gross margin, up sequentially. $6.6 million operating income.

Aerospace/defense market represented 14% of revenue, down sequentially from 15%. Revenue was flat sequentially.

Cellular Phones represented 35% of revenue, up sequentially from 25%. Sales were better than anticipated. Revenue was up 54% y/y. This reflected strength both from the largest customer and from Chinese customers. While Q1 sales are expected to be seasonally down, they will show good growth y/y.

Computing, storage and peripherals market represented 10% of revenue, down from 13%. Revenue was down about 5% sequentially on weaker demand from server and storage customers.

Medical and industrial was strong, at 8% of revenue, down sequentially from 9%. Revenue was flat sequentially. Should go back to 9% of sales in Q1.

Networking and communications end market was 27%, down from 32% in Q3. Revenue was up 8% y/y. In Q1 expected to be flat y/y.

Other was 6% of revenue, flat from Q3. Revenue up about 10% sequentially, but will be seasonally lower in Q1.

Top five customers: Apple, Cisco, Ericsson, Huawei, and United Technologies. They accounted for 52% of sales in quarter. One customer accounted for 34% of sales in the quarter, which is the typical seasonal peak for that customer.

End of quarter backlog was up $26.2 million y/y to $201 million

Book-to-bill ratio was 0.92 (up from 0.85 year-earlier.) ASPs increased 3% sequentially in Asia. But prices were down 3% in North America. ASP changes were due to product mix changes.

Cash and equivalents ended at $279 million, up sequentially from $249 million. $52.4 million cash flow from operations. Cap ex $26.3 million. Net debt $277 million, down $30 million sequentially.

Cost of goods sold was $322.4 million, leaving GAAP gross profit of $68.5 million. Operating expenses of $41.9 million consisted of: sales and marketing $9.9 million; general and administrative $30.0 million; amortization $1.9 million. Leaving operating income of $26.6 million. Interest expense was $5.7 million. Other income $1.6 million. Income tax expense $8.6 million.

Effective tax rate was 30%, lower sequentially on the R&D tax credit renewal.

In 2015 will transition the Viasystems integration quickly. Will used advanced technology capability to enter or enlarge markets beyond cell phones. Will reduce costs. Expects about $100 million in capital expenditures in 2015.

Plans to sell the entity used to close the MAS facility, which should generate $20 million in cash in Q1 and Q2, but should not generate a significant gain or loss.

Q&A:

Capacity expansion in North America, specifics of the bottleneck it relieved? Our Wisconsin facility mainly does network and telecommunications prototypes. Certain technology requires an additional plating layer with specialized equipment to lay it. We needed the plating capability to meet the technology requirements. So we added capacity, but it was driven by a technology need.

Is 50% utilization acceptable? The gross margin performance in North America was up sequentially. We calculate utilization based on plating capacity, but the bottlenecks are usually elsewhere in the process. It is a high-mix, low volume environment, which always means operating at a low utilization. However, we will be looking at our combined footprint with Viasystems.

Exposure to handset customers other than the top one? We saw good y/y improvements in the greater China customer base. As customers move to 4G we see volumes picking up. But our Korean customer volumes have not picked up.

Telecommunications demand? There has been some impact from a temporary slowdown on the China 4G rollout. On networking side the environment has been strong. Combined network and communications is looking flat y/y.

Advanced HDI in Q1? We are seeing y/y strength in smartphones, but of course sequentially down.

For the year 2015 we expect good cell phone growth, and so an increased HDI % of revenue.

How do you see tablet builds? We were down y/y in computing, partly due to favoring of smartphones over tablets.

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