TTM Technologies, Inc. — Q1 2024 Form 10-Q
Reporting period: Quarter ended April 1, 2024; comparative quarter ended April 3, 2023. Financial statements are unaudited. TTM manufactures printed circuit boards (PCBs), RF and specialty components, and mission systems for markets including aerospace and defense, data center computing, automotive, medical/industrial/instrumentation, and networking.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net sales | $570.1 million | $544.4 million |
| Gross profit / margin | $103.7 million / 18.2% | $86.1 million / 15.8% |
| Operating income (loss) / margin | $17.1 million / 3.0% | $(3.5) million / (0.6)% |
| Net income (loss) | $10.5 million | $(5.8) million |
| Diluted EPS | $0.10 | $(0.06) |
| Cash from operations | $43.9 million | $55.1 million |
Sales increased 4.7%. PCB revenue rose 5.2% to $561.8 million, while RF and Specialty Components revenue fell 19.9% to $8.3 million. Aerospace and defense and data center computing drove PCB growth; weakness in automotive, medical/industrial/instrumentation, and networking partly offset it. Data center computing sales rose to $119.4 million from $57.9 million, while aerospace and defense sales increased to $264.8 million from $232.3 million.
Gross margin improved mainly on a more favorable PCB product mix and better North American execution. RF and Specialty Components gross margin declined to 47.5% from 49.6%, primarily due to lower sales. Operating expenses were $86.7 million versus $89.6 million: lower amortization helped, but general and administrative expense increased $8.6 million, chiefly from personnel costs, stock compensation, bad debt, and other spending. Other expense fell to $3.0 million from $10.3 million, largely reflecting higher foreign currency gains and interest income.
Cash, liquidity, and debt
- Cash and cash equivalents were $440.4 million at April 1, 2024, down $9.8 million from January 1; approximately $203.0 million was held by foreign subsidiaries, primarily in China.
- Operating cash flow was $43.9 million. Investing used $42.6 million, including $49.3 million for property, plant, equipment, and other assets; financing used $11.1 million, including $9.3 million of share repurchases and $1.8 million of debt repayment.
- Debt principal totaled $927.4 million; reported long-term debt, net of discounts and issuance costs, was $913.9 million, with $2.6 million current. Debt included $500 million of 4.00% notes due 2029, a $347.4 million term loan due 2030, and $80 million of Asia ABL borrowings.
- Current assets were $1.406 billion and current liabilities $671.2 million. TTM reported compliance with its debt covenants and believes cash, operating cash generation, and available financing will meet anticipated needs for the next 12 months.
Changes, outlook, and risks
- Operating performance turned profitable year over year. The prior-year comparison included a $1.3 million gain on sale of a subsidiary; no such gain was recorded this quarter. The current-quarter benefit from foreign currency gains was also notable.
- Operating cash flow declined from $55.1 million, which management attributed primarily to increased working-capital investment. Capital spending was $49.3 million in cash purchases; total 2024 capital expenditures are expected to be $170–190 million.
- TTM is planning a proposed advanced-technology PCB facility in Syracuse, New York. Phase one is estimated at $100–130 million through 2026; scope and timing remain subject to finalizing funding with stakeholders and required permitting.
- The company repurchased 600,000 shares for $9.3 million during the quarter. Approximately $66.2 million remained under the $100 million program, which runs through May 3, 2025.
- Long-term contract remaining performance obligations were $385.3 million; approximately 49% is expected to be recognized over the next 12 months. Estimated remaining costs to complete loss contracts increased to $34.0 million from $25.2 million.
- Risks include customer concentration (top ten customers represented 53% of sales, versus 48% a year earlier; two customers together represented approximately 22% of current-quarter sales), exposure to interest rates, foreign exchange and commodity prices, and potential tax costs if foreign cash is repatriated. A $250 million interest-rate swap hedges part of variable-rate debt; management estimates a 100-basis-point rate change would alter annual interest cost by $1.8 million.
- Outstanding foreign offset agreements were approximately $28.0 million, some extending through 2028. Legal matters were described as ordinary-course; accrued loss contingencies were not material, although an adverse outcome could materially affect a particular period. Management cited global volatility, including the Russia-Ukraine and Israel-Gaza conflicts, as a source of estimation uncertainty.
Investor verification points
- Assess whether aerospace/defense and data center demand can sustain sales growth, and monitor weakness in other end markets and declining RF and Specialty Components sales.
- Track whether margin gains persist as capacity utilization remains low: PCB utilization was 52% in Asia and 38% in North America, versus 52% and 39% a year earlier.
- Compare planned capital spending and the Syracuse project’s final funding, scope, and schedule with cash generation and liquidity.
- Monitor working capital, loss-contract cost estimates, debt service and covenants, customer concentration, foreign-cash accessibility, and exposure to currency and commodity movements.