TTM Technologies Inc 2026 Q3 Earnings Call

Welcome, and thank you for joining us today. I am Sean Hannan, Vice President of Investor Relations for TTM. With me on the call are Edwin Roks, our President and Chief Executive Officer, and Dan Boehle, our Executive Vice President and Chief Financial Officer. Before we get started, I would like to remind everyone today that the call contains forward-looking statements, including statements related to TTM's future business outlook. Actual results could differ materially from these forward-looking statements due to one or more risks and uncertainties, including the risk factors we provide in our filings with the Securities and Exchange Commission, which we encourage you to review. These forward-looking statements represent management's expectations and assumptions based on currently available information.

TTM does not undertake any obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or other circumstances, except as required by law. We will also discuss on this call certain non-GAAP financial measures such as adjusted EBITDA. Such measures should not be considered as a substitute for the measures prepared and presented in accordance with GAAP, and we direct you to the reconciliations between GAAP and non-GAAP measures included in the company's earnings release, which is available on the investor relations section of TTM's website at investors.ttm.com. We have also posted on the website an earnings presentation that we will refer to during the call. Here is Edwin. Thank you, Sean.

Good afternoon, everyone, and thank you for joining us for our third quarter 2026 conference call. At TTM Technologies, we are focused on designing and manufacturing complex advanced interconnect products and printed circuit boards in addition to what we term up as up the chain products and solutions such as sophisticated RF modules, resulting in subsystems and fully integrated mission systems for communications and sensing purposes. Core to the design of all our products and solutions, as well as the strategy of our business, is the innovative focus to satisfy next generation needs for our customers and end markets, particularly regarding SWaP or size, weight, and power.

We believe the future of electronics lies in speed to market, high reliability, and efficient technology integration. We consequently engage early with our customers, often multiple years in advance as part of their program roadmaps to ensure this alignment while also enabling optimal management of their complex supply chains. It continues to be a very successful year for TTM Technologies so far. Our third quarter sets another new record with over $1.2 billion in revenue, and we expect to close out the year strong, aided by increased shipments of our N plus M product offerings for Data Center & Networking end markets, in addition to continuing strong demand for TTM Technologies's Aerospace & Defense business and product offerings. Proposal activity in our Aerospace & Defense business remain at all-time highs with a record backlog of $2 billion.

We already have visibility into roughly 65% of our projected A&D revenue for 2027. Our medical, industrial, and instrumentation and automotive end markets also outperformed our expectation year to date. With all our business performing well in 2026 to date, we are increasing our full year 2026 revenue guidance from $4.47 billion to $4.49 billion. Since our last quarterly earnings call, we have had many exciting developments here at TTM Technologies, and we continue to execute our long-term business strategy focused on projected value creation for our customers and shareholders. As we framed at our investor day in May, TTM Technologies continues to invest in organic growth opportunities and technological advancements across our product offerings for all our end markets, in addition to strategic M&A to enhance our capabilities and add diversification and longer-term structural enhancements. To that end, we discussed three key strategic directives.

First, investment in capacity and innovative technology for advanced interconnect. As previously disclosed in this area, we have invested or committed to invest over $1.3 billion in capacity expansion in the 2025 to 2029 timeframe across both our Data Center & Networking and Aerospace & Defense end markets. While our commercial segment is currently the primary target for these investments, our model has proven over time that our investments in our commercial technology advances provide critical value to leverage into our A&D offerings as that end market continues to modernize. Last week, we announced an additional $400 million planned investments that is expected to begin in the fourth quarter of 2026 and continue into early 2028. This would primarily support revenue production focused on the 2028 period.

The basis of this initial investment provides critical commercial Data Center & Networking end market customer support in their strong demands and road mapping requirements to utilize our unique end-to-end product approach. Recall, the majority of our customer business in this market currently is with our industry-leading, innovative, established, and critical AI players. We remind investors that our fundamental business model has been, continues to be, what we discussed at the investor day, and that is to pursue a very disciplined, risk-reduced, brownfield expansion approach for internal organic investments, with the expectations to fund these efforts from operating cash without any anticipated needs to access our borrowing facilities. These investments have been given substantial forethought, are purposeful, aligned with our customers, and not simply reactive to the strong demand environment.

Our commitment to these investments is driven by our confidence in our projected cash flows, supported by our visibility to the anticipated strong demand requirements of our differentiated and advancing technologies. We are also in the early stages of investing in a new innovation center in the Eau Claire, Wisconsin facility, very close to our existing technology center in Chippewa Falls, Wisconsin. This facility will spearhead our intensifying R&D activities focused on pioneering technological advances such as mSAP, SAP, passives, and advanced optics, among other technologies. Second, recall that we are extremely focused on our diversified business model, and that as part of this, we've pursued our initial geographic expansion in the European region. In June, we announced our intention to acquire two well-established European companies, Swiss Technology Group AG and ILFA, to begin this effort.

We've since closed the Swiss Technology Group AG acquisition, now called TTM GS Swiss, and we believe we're nearing the close of ILFA. On Monday, we announced the planned acquisition of Ophir Optics, which would establish a presence in Israel and Romania. I'll share some additional comments on Ophir Optics in a few moments. Additionally, we engaged last week in plans to acquire two small but strategic printed circuit board companies under the Merlin PCB Group holding company in the U.K. We are excited that all these transactions are both strategic from a technology and capability standpoint, and also in terms of adding international diversification to our business information model. Finally, our third strategic directive is investment in what we call up the chain of vertical product solutions that focus on communication and sensing. In line with this directive, we acquired Epiq Solutions, which has closed on September 30th.

We are excited to welcome the Epiq team members into TTM as we continue the integration activities. The announced plan to acquire Ophir Optics also supports the theme of up the chain, and both these companies bring a unique set of competencies that will deliver differentiated and high-value solutions to our end markets. I now provide a few additional comments on the proposed acquisition of Ophir Optics before we move on to discuss our operating results of the quarter. Ophir Optics is a global leader in precision infrared thermal imaging and laser optic solutions for defense, homeland security, and industrial applications, with locations in Israel and Romania. With Ophir's market-leading advanced infrared and laser optical components, we can offer our customers solutions, and we can combine these optics with our other in-house modalities and our interconnect capabilities. This applies for both A&D and industrial applications.

In A&D, we expect to have the opportunity to combine infrared optics and RF radar systems to offer customers a highly integrated and very small form factor mission subsystem for unmanned and counter unmanned aerial systems. Both critical to modernize defense priorities. On top of that, Epiq will add processing capabilities. Optics and processing are the key differentiators in any optical sensing system. Consequently, we expect the potential combined offerings of Epiq Solutions and Ophir Optics can advance a common strategy moving up the defense value chain and bringing together complementary software-defined radios and infrared capabilities. Both are keys to expanding our role in mission-critical sensing modalities such as surveillance, reconnaissance, communications, and electronic warfare. In industrial, this proposed acquisition provides laser optical subsystems used for shaping laser beams in industrial cutting, welding, and PCB drilling machines. We are very excited for the opportunities ahead.

From a financial perspective, the proposed acquisition of Ophir Optics is projected to incrementally benefit our financial model by adding more high-margin, long-cycle business to our mix. Let me go through the financial highlights with you. We are acquiring Ophir Optics business for an all-cash purchase of $650 million as a carve-out from MKS. The transaction is expected to be funded through a combination of cash on hand and borrowings under TTM's existing revolving credit facility. At this time, we believe it's important to convey to all our shareholders that we do not have any current incremental needs or plans to come to the financial markets to access capital. On timing, we expect to close this in the second quarter of 2027, subject to regulatory approvals and other customary closing conditions.

Ophir Optics experiencing strong revenue growth and margin expansion, and the transaction is expected to be immediately accretive to our adjusted EBITDA margins and our non-GAAP diluted EPS. The transaction multiple is estimated to be roughly 10x the expected Ophir Optics full year 2027 adjusted EBITDA without synergies. TTM's net leverage at closing is expected to be less than 2x adjusted last 12 months EBITDA, and therefore, within our targeted leverage range. I'll now move on to an overview of our business highlights from the quarter. We'll follow up with a summary on our Q3 2026 financial performance, our Q4 and full year 2026 guidance, and our initial preliminary guidance for 2027.