Form: 8-K

Current report filing

February 6, 2019

Exhibit 99.1

 

TTM Technologies, Inc., Q4’18   

Contact:

Sameer Desai,

Senior Director, Corporate

Development & Investor Relations

Sameer.desai@ttmtech.com

714-327-3050

TTM Technologies, Inc. Reports Fiscal Fourth Quarter and Fiscal 2018 Results

COSTA MESA, CA – February 6, 2019 – TTM Technologies, Inc. (NASDAQ:TTMI), a leading global printed circuit board (“PCB”) and radio frequency (“RF”) components manufacturer, today reported results for the fourth quarter and full year of fiscal 2018, which ended December 31st, 2018.

Fourth Quarter 2018 Highlights

 

  –  

Net sales were $711.0 million

  –  

GAAP net income was $52.5 million, or $0.42 per diluted share

  –  

Non-GAAP net income was $55.0 million, or $0.52 per diluted share

  –  

Cash flow from operations of $151.8 million

  –  

Repaid $70 million of our Term Loan B in Q4 and an additional $30 million on February 1st, 2019

Fiscal Year 2018 Highlights

 

  –  

Net sales were $2.85 billion, a record high

  –  

GAAP net income was $173.6 million, or $1.38 per diluted share

  –  

Non-GAAP net income was $190.4 million, or $1.76 per diluted share, a record high

  –  

Cash flow from operations of $273.1 million

  –  

Repaid $114 million of our Term Loan B in 2018

Fourth Quarter 2018 Financial Results

Net sales for the fourth quarter of 2018 were $711.0 million, compared to $739.3 million in the fourth quarter of 2017 and $755.8 million in the third quarter of 2018.

GAAP operating income for the fourth quarter of 2018 was $42.8 million, compared to $71.0 million in the fourth quarter of 2017 and $54.6 million in the third quarter of 2018.

GAAP net income for the fourth quarter of 2018 was $52.5 million, or $0.42 per diluted share. This compares to $49.2 million, or $0.40 per diluted share, in the fourth quarter of 2017 and $27.0 million, or $0.22 per diluted share, in the third quarter of 2018. The current quarter results reflect the release of a tax valuation allowance of $43.6 million.

On a non-GAAP basis, net income for the fourth quarter of 2018 was $55.0 million, or $0.52 per diluted share. This compares to non-GAAP net income of $61.2 million, or $0.57 per diluted share, for the fourth quarter of 2017 and $55.1 million, or $0.50 per diluted share, in the third quarter of 2018.

Adjusted EBITDA for the fourth quarter of 2018 was $117.4 million, or 16.5 percent of net sales, compared to adjusted EBITDA of $121.7 million, or 16.5 percent of net sales, for the fourth quarter of 2017 and $122.3 million, or 16.2 percent of net sales, for the third quarter of 2018.

“For the fourth quarter, TTM delivered earnings above the high end of guidance, despite softening commercial end markets,” said Tom Edman, CEO of TTM. “We were pleased to see strong year over year growth from the aerospace and defense, computing and medical/industrial/instrumentation end markets that partially offset weakness in our cellular and automotive end markets. Solid operational execution and expense management resulted in our operating margin exceeding expectations.”

Full Year 2018 Financial Results

Net sales for fiscal year 2018 increased to $2.85 billion from $2.66 billion in fiscal year 2017, a 7.1% increase year over year.


TTM Technologies, Inc., Q4’18   

Contact:

Sameer Desai,

Senior Director, Corporate

Development & Investor Relations

Sameer.desai@ttmtech.com

714-327-3050

 

GAAP operating income for fiscal year 2018 was $159.1 million, a decrease from GAAP operating income of $212.8 million in fiscal year 2017.

GAAP net income for fiscal year 2018 was $173.6 million, or $1.38 per diluted share, compared to GAAP net income of $124.2 million, or $1.04 per diluted share, for fiscal year 2017. The 2018 results reflect the release of a tax valuation allowance of $118.2 million.

On a non-GAAP basis, net income for fiscal year 2018 was $190.4 million, or $1.76 per diluted share. This compares to fiscal year 2017 non-GAAP net income of $167.1 million, or $1.57 per diluted share.

Adjusted EBITDA for fiscal year 2018 was $438.8 million, or 15.4 percent of net sales, compared to $388.6 million, or 14.6 percent of net sales, for fiscal year 2017.

“2018 validated TTM’s strategy of diversification, differentiation and discipline. We saw solid organic growth in the aerospace and defense, medical, industrial and instrumentation and computing end markets,” continued Edman. “In addition, we closed the acquisition of Anaren which allows us to engage with customers earlier in the design cycle providing differentiated, value added RF solutions.”

Business Outlook

For the first quarter of 2019 TTM estimates that revenue will be in the range of $610 million to $650 million, and non-GAAP net income will be in the range of $0.14 to $0.20 per diluted share.

“In the first quarter of 2019, we are seeing significant weakness in our cellular end market which is resulting in the under-utilization of our advanced technology factories. Consequently, we are exercising discipline in managing our costs and focusing on continued cash flow generation. Longer term, we are confident in our diversification and differentiation strategy as well as secular growth drivers such as 5G wireless technology, increasing automotive electronic content, and ongoing demand strength in aerospace and defense electronics,” concluded Mr. Edman.

To Access the Live Webcast/Conference Call

TTM will host a conference call and webcast to discuss fourth quarter 2018 results and first quarter 2019 outlook on Wednesday, February 6, 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 866-548-4713 or international 323-794-2093 (ID 3216797). 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.


TTM Technologies, Inc., Q4’18   

Contact:

Sameer Desai,

Senior Director, Corporate

Development & Investor Relations

Sameer.desai@ttmtech.com

714-327-3050

 

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.

- Tables Follow -


TTM TECHNOLOGIES, INC.

Selected Unaudited Financial Information

(In thousands, except per share data)

 

     Fourth Quarter     Third Quarter     Full Year  
     2018     2017     2018     2018     2017  

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

          

Net sales

   $ 710,955     $ 739,349     $ 755,837     $ 2,847,261     $ 2,658,592  

Cost of goods sold

     588,323       607,488       626,253       2,390,227       2,229,011  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     122,632       131,861       129,584       457,034       429,581  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Selling and marketing

     18,533       17,081       18,533       73,313       65,856  

General and administrative

     39,615       37,764       39,974       159,437       128,489  

Amortization of definite-lived intangibles

     17,722       5,907       16,609       59,681       23,634  

Restructuring charges

     3,962       65       (82     5,518       1,190  

(Gain)/loss on sale of assets

     —         —         —         —         (2,348
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     79,832       60,817       75,034       297,949       216,821  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     42,800       71,044       54,550       159,085       212,760  

Interest expense

     (22,533     (13,782     (22,225     (78,958     (53,898

Loss on extinguishment of debt

     —         —         —         —         (769

Other, net

     2,357       (3,617     2,213       9,641       (18,135
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     22,624       53,645       34,538       89,768       139,958  

Income tax (provision) / benefit

     29,858       (4,329     (7,537     83,816       (15,231
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 52,482     $ 49,316     $ 27,001     $ 173,584     $ 124,727  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to noncontrolling interest

     —         (105     —         —         (513
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to stockholders

   $ 52,482     $ 49,211     $ 27,001     $ 173,584     $ 124,214  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share attributable to stockholders:

          

Basic

   $ 0.51     $ 0.48     $ 0.26     $ 1.68     $ 1.22  

Diluted

   $ 0.42     $ 0.40     $ 0.22     $ 1.38     $ 1.04  

Weighted-average shares used in computing per share amounts:

          

Basic

     103,683       101,817       103,676       103,355       101,580  

Diluted

     131,533       133,170       136,435       134,036       132,476  

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

          

Net income attributable to stockholders

   $ 52,482     $ 49,211     $ 27,001     $ 173,584     $ 124,214  

Add back items: interest expense, net of tax

     3,030       3,508       3,628       11,906       13,803  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income attributable to stockholders

   $ 55,512     $ 52,719     $ 30,629     $ 185,490     $ 138,017  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     103,683       101,817       103,676       103,355       101,580  

Dilutive effect of convertible debt

     25,939       25,939       25,938       25,939       25,940  

Dilutive effect of warrants

     —         2,938       5,226       3,065       2,799  

Dilutive effect of performance-based stock units, restricted stock units & stock options

     1,911       2,476       1,595       1,677       2,157  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted shares

     131,533       133,170       136,435       134,036       132,476  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share attributable to stockholders:

          

Basic

   $ 0.51     $ 0.48     $ 0.26     $ 1.68     $ 1.22  

Diluted

   $ 0.42     $ 0.40     $ 0.22     $ 1.38     $ 1.04  

SELECTED BALANCE SHEET DATA

          
     December 31, 2018     January 1, 2018                    

Cash and cash equivalents, including restricted cash

   $ 256,360     $ 409,326        

Accounts and notes receivable, net

     523,165       483,903        

Contract assets

     287,741       —          

Inventories

     109,377       294,588        

Total current assets

     1,206,914       1,221,307        

Property, plant and equipment, net

     1,052,024       1,056,845        

Other non-current assets

     1,198,565       503,730        

Total assets

     3,457,503       2,781,882        

Short-term debt, including current portion of long-term debt

   $ 30,000     $ 4,578        

Accounts payable

     431,288       497,455        

Total current liabilities

     673,214       720,356        

Debt, net of discount

     1,462,425       975,479        

Total long-term liabilities

     1,557,202       1,050,146        

Total equity

     1,227,087       1,011,380        

Total liabilities and equity

     3,457,503       2,781,882        


SUPPLEMENTAL DATA

          
     Fourth Quarter     Third Quarter     Full Year  
     2018     2017     2018     2018     2017  

Gross margin

     17.2     17.8     17.1     16.1     16.2

Operating margin

     6.0     9.6     7.2     5.6     8.0

End Market Breakdown:

          
     Fourth Quarter     Third Quarter              
     2018     2017     2018              

Aerospace/Defense

     24     15     23    

Automotive

     16     18     15    

Cellular Phone

     14     27     17    

Computing/Storage/Peripherals

     13     10     14    

Medical/Industrial/Instrumentation

     14     12     13    

Networking/Communications

     18     17     17    

Other

     1     1     1    

Stock-based Compensation:

          
     Fourth Quarter     Third Quarter              
     2018     2017     2018              

Amount included in:

          

Cost of goods sold

   $ 766     $ 613     $ 774      

Selling and marketing

     525       450       520      

General and administrative

     4,442       3,921       4,165      
  

 

 

   

 

 

   

 

 

     

Total stock-based compensation expense

   $ 5,733     $ 4,984     $ 5,459      
  

 

 

   

 

 

   

 

 

     

Operating Segment Data:

          
     Fourth Quarter     Third Quarter              

Net sales:

     2018       2017       2018      
  

 

 

   

 

 

   

 

 

     

PCB

   $ 655,706     $ 688,572     $ 698,983      

E-M Solutions

     57,473       54,899       59,481      

Corporate

     —         —         —        
  

 

 

   

 

 

   

 

 

     

Total sales

     713,179       743,471       758,464      

Inter-segment sales

     (2,224     (4,122     (2,627    
  

 

 

   

 

 

   

 

 

     

Total net sales

   $ 710,955     $ 739,349     $ 755,837      
  

 

 

   

 

 

   

 

 

     

Operating segment income:

          

PCB

   $ 87,201     $ 100,352     $ 98,039      

E-M Solutions

     3,364       2,799       2,205      

Corporate

     (28,863     (26,200     (26,920    
  

 

 

   

 

 

   

 

 

     

Total operating segment income

     61,702       76,951       73,324      

Amortization of definite-lived intangibles

     (18,902     (5,907     (18,774    
  

 

 

   

 

 

   

 

 

     

Total operating income

     42,800       71,044       54,550      

Total other expense

     (20,176     (17,399     (20,012    
  

 

 

   

 

 

   

 

 

     

Income before income taxes

   $ 22,624     $ 53,645     $ 34,538      
  

 

 

   

 

 

   

 

 

     


RECONCILIATIONS1

          
     Fourth Quarter     Third Quarter     Full Year  
     2018     2017     2018     2018     2017  

Non-GAAP gross profit reconciliation2:

          

GAAP gross profit

   $ 122,632     $ 131,861     $ 129,584     $ 457,034     $ 429,581  

Add back item:

          

Inventory markup

     —         —         —         4,900       —    

Amortization of definite-lived intangibles

     1,180       —         2,165       3,345       —    

Stock-based compensation

     766       613       774       2,898       2,252  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross profit

   $ 124,578     $ 132,474     $ 132,523     $ 468,177     $ 431,833  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross margin

     17.5     17.9     17.5     16.4     16.2

Non-GAAP operating income reconciliation3:

          

GAAP operating income

   $ 42,800     $ 71,044     $ 54,550     $ 159,085     $ 212,760  

Add back items:

          

Amortization of definite-lived intangibles

     18,902       5,907       18,774       63,026       23,634  

Stock-based compensation

     5,733       4,984       5,459       20,681       18,290  

(Gain)/loss on sale of assets

     —         —         —         —         (2,348

Inventory markup

     —         —         —         4,900       —    

Impairments, restructuring, acquisition-related, and other charges

     6,104       2,331       230       18,797       3,556  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income

   $ 73,539     $ 84,266     $ 79,013     $ 266,489     $ 255,892  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating margin

     10.3     11.4     10.5     9.4     9.6

Non-GAAP net income and EPS attributable to stockholders reconciliation4:

          

GAAP net income attributable to stockholders

   $ 52,482     $ 49,211     $ 27,001     $ 173,584     $ 124,214  

Add back items:

          

Amortization of definite-lived intangibles

     18,902       5,907       18,774       63,026       23,634  

Stock-based compensation

     5,733       4,984       5,459       20,681       18,290  

Non-cash interest expense

     4,384       3,017       3,992       14,783       11,069  

(Gain)/loss on sale of assets

     —         —         —         —         (2,348

Inventory markup

     —         —         —         4,900       —    

Loss on extinguishment of debt

     —         —         —         —         769  

Impairments, restructuring, acquisition-related, and other charges

     6,104       2,331       230       19,339       3,556  

Income taxes5

     (32,614     (4,204     (337     (105,916     (12,059
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income attributable to stockholders

   $ 54,991     $ 61,246     $ 55,119     $ 190,397     $ 167,125  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP earnings per diluted share attributable to stockholders

   $ 0.52     $ 0.57     $ 0.50     $ 1.76     $ 1.57  

Non-GAAP diluted number of shares6:

          

Diluted shares

     131,533       133,170       136,435       134,036       132,476  

Dilutive effect of convertible debt

     (25,939     (25,939     (25,938     (25,939     (25,940
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP diluted number of shares

     105,594       107,231       110,497       108,097       106,536  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA reconciliation7:

          

GAAP net income

   $ 52,482     $ 49,316     $ 27,001     $ 173,584     $ 124,727  

Add back items:

          

Income tax provision (benefit)

     (29,858     4,329       7,537       (83,816     15,231  

Interest expense

     22,533       13,782       22,225       78,958       53,898  

Amortization of definite-lived intangibles

     18,902       5,907       18,774       63,026       23,634  

Depreciation expense

     41,543       41,090       41,092       162,708       150,809  

Stock-based compensation

     5,733       4,984       5,459       20,681       18,290  

(Gain)/loss on sale of assets

     —         —         —         —         (2,348

Inventory markup

     —         —         —         4,900       —    

Loss on extinguishment of debt

     —         —         —         —         769  

Impairments, restructuring, acquisition-related, and other charges

     6,104       2,331       230       18,797       3,556  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 117,439     $ 121,739     $ 122,318     $ 438,838     $ 388,566  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin

     16.5     16.5     16.2     15.4     14.6

Free cash flow reconciliation:

          

Operating cash flow

     151,768       152,691       79,992       273,138       332,755  

Capital expenditures, net

     (33,671     (32,209     (35,038     (149,796     (124,090
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

   $ 118,097     $ 120,482     $ 44,954     $ 123,342     $ 208,665  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1

This information provides a reconciliation of non-GAAP gross profit, non-GAAP operating income, non-GAAP net income attributable to stockholders, non-GAAP EPS attributable to stockholders, and adjusted EBITDA to the financial information in our consolidated condensed statements of operations.

 

2

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

 

3

Non-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, asset impairments, restructuring and other charges.

 

4

This information provides non-GAAP net income attributable to stockholders and non-GAAP EPS attributable to stockholders, 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, asset impairments, 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 an annual GAAP tax rate.

 

6

Non-GAAP diluted number of shares used in computing non-GAAP earnings per share attributable to stockholders 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, asset impairments, 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.