TTM Technologies, Inc. (TTMI) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates strong financial performance with a 22% YoY net sales increase and improved operating income. Despite a slight gross margin decline, the company is making strategic investments in facilities and R&D. The Q&A reveals confidence in capacity and strategic direction, with improved margin forecasts. The aerospace, defense, and data center markets show strong growth, and management's focus on qualitative growth and cash generation is positive. Considering the market cap, the stock price is likely to see a positive movement (2% to 8%) over the next two weeks.
Key Financial Performance
Sales Sales grew 22% year-on-year, reflecting continued demand strength in our data center computing and networking end markets, driven by the requirements of generative AI. Medical, industrial, instrumentation, and aerospace and defense end markets also experienced double-digit year-on-year sales growth.
Adjusted EBITDA Margin The company's adjusted EBITDA margin was 16.1%, which is comparable to 16.3% in the same quarter a year ago, reflecting continued solid execution.
Non-GAAP EPS Non-GAAP EPS of $0.67 reflects a solid consecutive quarterly record for TTM.
Cash Flows from Operations Cash flows from operations were $141.8 million or 18.8% of sales, which brings the year-to-date cash flow from operation to $229 million or 10.7% of sales.
Aerospace and Defense Sales Sales in this market grew 20% year-on-year to a record high, significantly better than expected, partially due to timing of sales originally planned in the fourth quarter. Solid demand was driven by positive tailwinds in defense budgets, strong strategic program alignment, and key bookings for ongoing programs.
Data Center Computing Sales This end market saw 44% year-on-year growth, which was better than expected and a record high due to continued demand strength from our data center customers building products for GenAI applications.
Medical, Industrial, and Instrumentation Sales This end market saw year-on-year growth of 22% during the third quarter of 2025 as the medical and industrial segment saw increased demand for robotics, and the instrumentation segment saw increased demand for automated test equipment and GenAI applications.
Automotive Sales Automotive sales represented 11% of third quarter 2025 sales compared to 14% in the third quarter of 2024. The year-over-year decline was primarily due to continued inventory adjustments and soft demand at several customers.
Networking Sales Year-on-year growth was 35% as this market continues to show strong growth driven by AI-related demand and new products.
Net Sales Net sales were $752.7 million compared to $616.5 million in the third quarter of 2024, a 22% year-over-year increase due to growth in aerospace and defense, data center computing, networking, and medical, industrial, and instrumentation end markets, partially offset by a slight decline in the automotive end market.
Gross Margin Gross margin for the third quarter of 2025 was 20.8% compared to 21.1% in the third quarter of 2024. The year-over-year decrease was primarily due to ramp-up costs in connection with the fabrication plant in Penang, Malaysia.
Operating Income Operating income for the third quarter of 2025 was $71.9 million or 9.6% compared to $51 million or 8.3% in the third quarter of 2024.
Net Income Net income in the third quarter of 2025 was $53.1 million or $0.50 per diluted share compared to $14.3 million or $0.14 per diluted share in the third quarter of 2024.
Aerospace and Defense Segment Sales The Aerospace and Defense segment recorded $336.8 million in net sales and $52.9 million in segment operating income compared to $279.5 million in net sales and $40.3 million in segment operating income in the year-ago quarter.
Commercial Segment Sales The Commercial segment recorded $408.9 million in net sales and $60 million in segment operating income compared to $329.4 million in net sales and $51.1 million in segment operating income in the year-ago quarter.
RF and Specialty Components Segment Sales The RF and Specialty Components segment recorded $10.4 million in net sales and $3.1 million in segment operating income compared to $9.8 million in net sales and $2.4 million in segment operating income in the year-ago quarter.
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Operating Highlights
AI-driven PCB design and mission-critical subsystems: TTM is advancing into highly complex modules and subsystems combining sensors, actuators, RF, and photonics for markets like aerospace, defense, data centers, telecom, instrumentation, and medical systems.
Ultra-HDI PCB manufacturing facility: Progress continues in Syracuse, New York, with equipment installation and testing underway. Volume production is expected in the second half of 2026.
Aerospace and defense: Sales grew 20% year-on-year to a record high, driven by strong demand and key bookings for programs like the AMRAAM missile and APS-153 radar system. This market represented 45% of Q3 sales.
Data center computing and networking: Sales grew 44% year-on-year, driven by demand for generative AI applications. This market represented 23% of Q3 sales and is expected to grow to 28% in Q4.
Medical, industrial, and instrumentation: Sales grew 22% year-on-year, driven by demand for robotics, automated test equipment, and AI applications. This market represented 14% of Q3 sales.
Penang facility: Sales remained steady at $5 million in Q3, with growth expected in Q4. Long-term plans for a second facility are in place, but construction timing depends on customer demand.
Adjusted EBITDA margin: Maintained at 16.1%, reflecting solid execution despite ramp-up costs in Penang.
Strategic review: The company is undergoing an annual strategic review, with plans to be presented to the Board next month. No immediate strategic changes were announced.
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Risk or Challenges
Tariffs and Economic Slowdown: While the company does not expect significant short-term impacts from tariffs due to its diversified supplier base and global manufacturing footprint, there is a potential indirect impact from overall end market demand weakness and economic slowdown, which could affect key end markets.
Ramp-up Costs in Penang Facility: The ramp-up costs associated with the fabrication plant in Penang, Malaysia, have contributed to a decrease in gross margin, indicating operational challenges in scaling production.
Automotive Market Weakness: The automotive end market experienced a year-over-year decline due to continued inventory adjustments and soft demand at several customers, which could impact overall sales performance.
Geopolitical Environment: The company mentioned an update on the geopolitical environment, which could imply potential risks related to global political and economic uncertainties affecting operations or supply chains.
Customer Demand Alignment for New Facilities: The timing of construction for the planned second production facility in Malaysia is dependent on long-term customer demand, indicating potential risks if demand does not materialize as expected.
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Guidance & Outlook
Q4 2025 Revenue Guidance: Net sales projected to be in the range of $730 million to $770 million.
Q4 2025 Non-GAAP EPS Guidance: Expected to be in the range of $0.64 to $0.70 per diluted share, inclusive of operating costs associated with the Penang facility.
Q4 2025 SG&A Expense: Expected to be about 8.9% of net sales.
Q4 2025 R&D Expense: Expected to be about 1% of net sales.
Q4 2025 Interest Expense: Expected to be approximately $10.2 million.
Q4 2025 Interest Income: Expected to be approximately $2.7 million.
Q4 2025 Effective Tax Rate: Estimated to be between 11% and 15%.
Q4 2025 Depreciation: Expected to be approximately $28.1 million.
Q4 2025 Amortization of Intangibles: Expected to be approximately $9.2 million.
Q4 2025 Stock-Based Compensation Expense: Expected to be approximately $12.3 million.
Q4 2025 Noncash Interest Expense: Expected to be approximately $0.5 million.
Penang Facility Growth: Sales expected to grow in Q4 2025, with long-term plans for a second production facility aligned with customer demand.
Ultra-HDI PCB Manufacturing Facility: Volume production expected to start in the second half of 2026.
Aerospace and Defense Sales: Expected to represent 42% of total Q4 2025 sales.
Data Center Computing Sales: Expected to grow to represent 28% of total Q4 2025 sales.
Medical, Industrial, and Instrumentation Sales: Expected to represent 14% of total Q4 2025 sales.
Automotive Sales: Expected to represent about 9% of total Q4 2025 sales.
Networking Sales: Expected to represent 7% of total Q4 2025 sales.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How far out does your visibility extend into the data center market, and have you been able to bring on additional capacity to satisfy demand from your facilities in China?
A:The visibility extends between 6 to 9 months. The company is dealing with top players and is well-balanced in terms of capacity between North America and Asia Pacific, ensuring sufficient capacity for the coming years.
Q:Can you update us on the margin headwind experienced in Penang and how it looks for Q4?
A:Penang remains a key part of the China Plus One strategy, with good progress being made. The company is focused on yield before ramping up and has five customers lined up for qualification by year-end. The margin headwind in Q3 was 195 basis points, an improvement from Q2's 210 basis points. For Q4, the impact is forecasted to be 160 basis points, comparable to Q4 of last year.
Q:What is your PCB manufacturing capacity share globally, in China, and in the U.S.?
A:In the U.S., the company is the #1 player. Globally, it ranks around #6 or #7, and in the data center segment, it is ranked #3 or #4.
Q:In Penang, you are starting with 15-layer boards. Where are you moving to in terms of density in China for data center applications?
A:The company is focusing on higher-layer boards, demonstrating up to 87 layers. They are making progress in stack micro vias, asymmetrical designs, and minimizing pitch, aiming to be a leader in these areas. Significant investments in R&D are planned to maintain their top position.
Q:Can you share your background and what led you to join TTM?
A:Edwin Roks has a background in engineering, business, and semiconductor physics. He spent 15 years at Philips, 20 years at DALSA and Teledyne, and was the CEO of Teledyne for the last two years. He joined TTM due to its fit with his expertise in the back-end semiconductor space and his motivation to work on integrating chips in compact heterogeneous packages.
Q:What metrics are most important to you for the future of the company?
A:The key metrics are growth, gross margin, cash generation, EBITDA, and bottom-line health. The company aims for qualitative growth while maintaining a healthy gross margin and cash position to enable investments and acquisitions.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer to the question about specific new targets for top-line organic growth and operating margin, instead emphasizing qualitative growth and maintaining healthy gross margins and cash flow.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AD
AI PCB
AI area
AI instrumentation
AMRAAM missile
APS radar
Army APS
Boehle TTM
Demand end
Equipment test
GenAI application
HDI PCB
Networking sale
Officer TTM
PCB design
PCBs electronics
Penang progress
President Chief
Progress HDI
RF photonics
Roks President
Sales aerospace
Sales demand
Sales market
TTM cash
cash flow
future
instrumentation sale
market record
mission
networking instrumentation
reliability
requirement AI
sale Sales
segment demand
supplier
tariff
test equipment
timing
TTMI Transcript
TTM Technologies, Inc. (TTMI) Q4 2025 Earnings Call Transcript
Positive2-4
The earnings call shows strong financial performance, with improved gross and operating margins, and significant growth in key sectors like data center computing and networking. Guidance is optimistic, with plans for expansion and increased capacity, particularly in China and Syracuse. The Q&A reveals management's focus on strategic growth and risk management, despite some unclear responses. The positive sentiment is further supported by the market cap, suggesting a likely stock price increase in the range of 2% to 8% over the next two weeks.
TTM Technologies, Inc. (TTMI) Q3 2025 Earnings Call Transcript
Positive10-29
The earnings call indicates strong financial performance with a 22% YoY net sales increase and improved operating income. Despite a slight gross margin decline, the company is making strategic investments in facilities and R&D. The Q&A reveals confidence in capacity and strategic direction, with improved margin forecasts. The aerospace, defense, and data center markets show strong growth, and management's focus on qualitative growth and cash generation is positive. Considering the market cap, the stock price is likely to see a positive movement (2% to 8%) over the next two weeks.
TTM Technologies, Inc. (TTMI) Q2 2025 Earnings Call Transcript
Positive7-30
The earnings call shows strong financial performance with increased GAAP operating and net income, and a 15% adjusted EBITDA. Although there are concerns about the breakeven timeline in Malaysia and cost competitiveness in Eau Claire, the company's strong revenue growth, operating margin improvement, and optimistic guidance for Q2 revenue and EPS are positive indicators. The defense sector's growth and customer diversification in the data center segment further bolster confidence. Given the market cap, these factors collectively suggest a positive stock price movement in the next two weeks.
TTM Technologies, Inc. (TTMI) Q1 2025 Earnings Call Transcript
Positive4-30
The earnings call summary indicates strong financial performance with a 14% YoY revenue increase and improved margins. The share buyback program suggests confidence in future growth. While there are some risks, such as supply chain challenges and defense budget uncertainty, these are being actively managed. The Q&A reveals positive momentum in data center and networking sectors, and the potential upside from the reconciliation bill. The stock's market cap suggests a moderate reaction, leading to a positive prediction of 2% to 8% increase in stock price.
TTMI Report
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Where does this earnings call transcript come from?
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