TTM Technologies, Inc. — Form 10-Q summary
Reporting period: 13-week quarter ended March 29, 2021. Results are unaudited and generally reflect continuing operations; the Mobility business was sold in April 2020 and is reported as discontinued operations in the prior-year comparison. Dollar amounts below are in millions unless stated otherwise.
Financial results
| Metric | Q1 2021 | Q1 2020 | Change / context |
|---|---|---|---|
| Net sales | $526.4 | $497.6 | Up 5.8% |
| Gross profit / margin | $81.6 / 15.5% | $81.3 / 16.3% | Gross profit broadly flat; margin down 0.8 percentage points |
| Operating income / margin | $19.8 / 3.8% | $16.2 / 3.3% | Operating income up 22.4% |
| Net loss | $(3.2) | $(1.2) | Includes $15.2 loss on extinguishment of debt in 2021 |
| Diluted loss per share | $(0.03) | $(0.01) | Continuing-operations loss per share was $(0.03) in both periods |
| Cash from continuing operations | $41.1 | $6.6 | Improved primarily due to lower working-capital investment |
| Capital expenditures and other asset purchases | $21.8 | $32.5 | Cash-flow statement amount |
Revenue mix: PCB sales were $510.5 million, up 7.7%; RF & Specialty Components sales were $12.7 million, up 34.4%. Aerospace and defense represented 35% of sales, automotive 18%, medical/industrial/instrumentation 17%, networking/communications 15%, and data center computing 14%. The PCB volume of shipments increased 28.8%, while average price per square foot declined 15.8%, mainly due to product mix.
Balance sheet, debt and liquidity
- Cash and cash equivalents were $539.6 million at March 29, 2021, up from $451.6 million at December 28, 2020. About $233.8 million was held by foreign subsidiaries, primarily in China.
- Long-term debt, net of discount and issuance costs, was $926.1 million; principal outstanding was $935.9 million. The company had $405.9 million of term loans due 2024, $500.0 million of 4.00% notes due 2029, and $30.0 million under the Asia ABL. No U.S. ABL balance remained.
- During the quarter, TTM issued $500.0 million of 2029 notes and used proceeds in part to repay the $375.0 million 2025 notes and $40.0 million drawn under the U.S. ABL. The refinancing generated the $15.2 million extinguishment loss. Reported interest expense fell $8.4 million year over year to $11.4 million.
- Unused borrowing capacity, net of letters of credit, was $139.2 million under the U.S. ABL and $108.3 million under the Asia ABL. The company reported compliance with debt covenants.
- Management stated that cash on hand, operating cash generation and available borrowing sources should meet anticipated capital expenditure, debt service and working-capital needs for the next 12 months.
Material changes, outlook and risks
- Gross margin pressure reflected approximately $13.0 million of added costs related to a stronger Chinese currency, higher raw-material costs—particularly copper—and COVID-related production inefficiencies. Management said higher revenue and operating efficiencies mitigated most of these costs.
- Asia PCB capacity utilization rose to 80% from 52%; North America utilization fell to 55% from 67%, with COVID-related production inefficiencies cited for the decline. RF & Specialty Components margin increased to 47.5% from 45.8%.
- Management expects 2021 capital expenditures of $70 million to $90 million. The filing provides no specific revenue or earnings guidance.
- TTM continued to face COVID-19 uncertainty, supply-chain disruption, and higher prices and lead times for copper-clad laminates and their inputs. It is seeking to pass increased costs to customers, improve efficiencies and diversify suppliers.
- The E-M Solutions restructuring closed two facilities at the end of 2020; cumulative restructuring charges were approximately $19.3 million and accelerated depreciation was $6.7 million through March 29, 2021. Q1 2021 restructuring charges were $3.2 million.
- Customer concentration increased: one customer accounted for approximately 13% of Q1 2021 sales, and the ten largest customers collectively accounted for 45%, versus 42% a year earlier. Aerospace and defense sales were 35% of revenue.
- Key disclosed risks include customer demand and concentration, raw-material availability and costs, foreign exchange and international operations, capacity utilization, substantial debt, interest-rate and LIBOR transition exposure, and ongoing pandemic effects. The company had a $100 million share-repurchase authorization through February 2023; no shares had been repurchased.
Important facts for investors to verify
- Whether higher copper and other input costs, currency movements and COVID-related inefficiencies continue to constrain PCB margins, and how much cost increases can be passed through.
- Whether PCB shipment growth and demand across automotive, data center and aerospace and defense markets persist despite lower average selling prices.
- Progress on planned capital spending, cash conversion and the stated 12-month liquidity outlook, including the availability and conditions of ABL facilities.
- Debt service, covenant headroom and the company’s exposure as LIBOR-based debt and hedges transition to replacement reference rates.
- Customer concentration and the impact of the largest customer, alongside the completion and costs of the E-M Solutions restructuring.