Good day, and welcome to the TTM Technologies Incorporated Q1 2016 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Sameer Desai, Senior Director of Corporate Development and Investor Relations of TTM. Please go ahead sir.

Thank you. Before we get started, I would like to remind everyone that today's call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, 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 factors explained in our most recent Annual Report on Form 10-K, and other filings with the Securities and Exchange Commission. These forward-looking statements are based on management's expectations and assumptions as of the date of this presentation. TTM does not undertake any obligation to publicly update or revise any of these statements, whether as a result of new information, future events or other circumstances, except as required by law. Please refer to the full disclosures regarding the risks that may affect TTM, which may be found in the reports on Form 10-K, 10-Q, 8-K, the registration statement on Form S-4 and the company's other SEC filings. 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 reconciliation of non-GAAP to GAAP measures included in the company's press release, which was filed with the SEC and is available on TTM's website at www.ttm.com. I would now like to turn the call over to Tom Edman, TTM's Chief Executive Officer. Please go ahead, Tom.

Thank you, Sameer and welcome to TTM. It is great to have you onboard. And thank you all for joining us for our first quarter 2016 conference call. I'll begin with a few highlights and a review of our business. Todd Schull, our CFO, will follow with a discussion of our financial performance. We will then open the call to your questions. TTM delivered solid results in the first quarter, revenue came in at $583.3 million and was within guidance. Non-GAAP EPS came in at $0.14 per diluted share and was above First Call consensus by $0.05 and above the top end of our guidance. Our diversification initiative is paying off as the relative strength in our aerospace and defense, automotive and computing end markets helped to offset demand in the cellular phone market. Strong operational execution drove better than expected non-GAAP EPS. As evidence of our improved operating efficiency and synergy realization, our $0.14 EPS in the quarter was significantly better than the $0.09 EPS of the two combined companies in Q1 last year on 8% lower revenue. As a result Viasystems became accretive in Q1. Finally, we repaid $76.5 million on our term loan, in line with our focus on deleveraging. Overall we continue to deliver on our strategic goals of improved diversification, leveraging our advanced technology position, growth in the automotive market, and operational excellence. I’ve already discussed the benefits of diversification as reflected in our performance in the first quarter. In the automotive area we made progress in our efforts to qualify our advanced technology facilities with the focus particularly on growth applications in ADAS, Advanced Driver Assistance Systems, infotainment, electric vehicles, and radar and LIDAR systems. After completing supply agreements with two tier 1 auto suppliers last quarter, we have started benchmarking activities with these…

Thanks Tom and good afternoon everyone. Before I get into the details of the numbers, let me summarize a few financial highlights for the quarter. Revenue in the first quarter was $583 million, a decline on a pro forma basis from last year's first quarter of $634 million due primarily to declines in the cellular phone end market. Non-GAAP EPS was $0.14 in the first quarter, this was above guidance by $0.03 and above the combined EPS of the two companies in Q1 last year of $0.09. The year-over-year improvement reflects the benefits of our diversification and synergy initiatives as we were able to offset the negative impacts of lower revenue in our cellular phone end market and an increased share count. We achieved non-GAAP operating margin of 5.7%, an improvement from the combined operating margin of the two companies in Q1 one year ago of 4.8% despite the lower revenues and an improvement from 3% in Q1 2014 when we had a similar product cycle in the cellular phone end market. The acquisition of Viasystems became accretive in the first quarter, and we repaid more than $75 million of our debt in Q1 demonstrating our commitment towards leveraging the company's balance sheet. Now onto the details, for the first quarter net sales of $583.3 million compared to net sales of $329.2 million in the first quarter of 2015 and compared to fourth quarter net sales of $668.9 million. The year-over-year increase was due to sales from the Viasystems acquisition of approximately $278 million offset by declines in the cellular phone end markets. On a pro forma basis, net sales in Q1 last year were $633.8 million. The year-over-year decline on a pro forma basis was due primarily to declines in the cellular phone end market. GAAP operating income in…

[Operator Instructions]. And our first question will come from Paul Coster with J.P. Morgan.

In terms of cellular segment customer base particular on with a contribution from Chinese OEMs should trend?

Hey Paul, can you repeat that question, we just caught the last part of it, so can you repeat the first part of the question, sorry.

Just where the customer segment base for your cellular segment is trending, how is it diversifying with possibly some Chinese OEMs taking more of a percentage?

Yes, okay. Yes, so that percentage of Greater China and Korea cellular phone participants remains at about 25% of that business. And as you could imagine, when we look at the impact on that cellular phone end market that also had an impact as the Chinese end market or pull through for product was down sequentially. So, what we -- as we look forward into the next quarter we are encouraged by continuing to have that base of business as they do tend to introduce products in the late spring as well as in the fall. So, looking forward to a better business environment there in the next quarter.

Got you, thanks. And then switching to Viasystems, has the firm targeted any other possible consolidation targets among the facilities, there is a nice jump in utilization rates in North America, is that rate sustainable and how do you see utilization rates trending throughout the year? Thanks.

Yes, so the -- let me address the utilization piece. You are right, there was an improvement of utilization rates. As you know in North America the utilization rate calculation that we use is not a great proxy because it centers around plating capacity that is not usually the bottle neck in a high mix flow volume facility set up like what we have in North America. But still encouraging to see the improvement and as I mentioned earlier, it really reflects both the consolidation but also a strong and increasingly strengthening environment in aerospace and defense. And to answer the first part of your question, as we look at that North America footprint we really are -- we are very appreciative of having the Viasystems footprint as part now of TTM as we are able to leverage the additional capability in aerospace and defense at the right time as we are seeing real tailwinds in our backlog for that business.

Let me chime in with a couple of comments. Indirectly I think you are getting at the -- our efforts regarding our synergy program and initiatives that we have had going there. So, let me just give a quick update on that, as we indicated in the comments we are more than 90% of the way in terms of executing or announcing plans to achieve that $55 million in synergies. So, really we don’t have much left to do and we know what we are going to do, we just have to let the time play out here in the second quarter which is our fourth quarter since the close. So, we are very confident about that, we are on track. In the quarter we had another $12 million or so of implementation, we did receive the benefit that we anticipated in Q1 and we expect to get increased flow through now another increment in Q2 that will benefit us and this is reflected in our higher EPS guidance that we are offering for Q2. The second comment that we get a lot quite frankly and as we are talking to you now is there an upside to that synergies and how do you manage all of that and I want to make a general statement that number one, it’s a way of life for us as a business in general to always aggressively manage our cost. The electronic supply chain is a very competitive environment to begin with and secondly there is natural price erosion overtime for established products and so you are always as a company looking to be more productive, looking to improve yields, looking to find cost reduction opportunities to mitigate those kinds of things to maintain or grow profit. Part of that strategy also is winning new projects that come in at a different price point to start the cycle all over again. So where we are running into the issue is, are we looking for additional cost opportunities or cost saving opportunities. The answer is absolutely. The challenge we are having is, well how do you tell what was the synergy and what's just our normal way of life. And we are kind of crossing that bridge here as we go into this year because we have our own goals and expectations for the year for all of our facilities not just the ones we acquired and we begin to lose visibility between what is a synergy and what is not. So we are confident in stating that we’ve achieved our synergy objective and we’re also willing to share with you or at least explain that we will continue to look for cost saving opportunities, we will continue to drive for yield improvements, we will continue to look for productivity improvements. That’s just the nature of our business.

Got it, thanks very much.

Thank you, Paul.

Our next question will come from Sean Hannon with Needham & Company.

Yes, good afternoon folks and nice job pulling some of those synergies out from the deal here. A couple of questions, the first one I want to see maybe I heard something incorrectly, cellular was 9% in the quarter but it is going to be 10% in the June quarter, did I not capture that correctly?

No, you captured that correctly.

Okay, so if I do back the envelope math on that it suggest your June is going to be up 14% quarter-over-quarter, that’s a pretty interesting dynamic guessing everything that were kind of appearing out there particularly with that large customer. So just trying to understand what really drives that? And I guess as a follow on question from an analyst earlier, is there an aspect of diversification with other customers that might be contributing to that quarter-on-quarter improvement? Thanks.

So yes, generally I think you are moving in the right direction there. And this has been something we have worked on for several years diversifying within the cellular phone market, diversifying our customer base. And as I mentioned earlier about 25% of that business does come from the Greater China and Korea customer base. They do tend to introduce products again in late spring as well as the fall and clearly as we look at Q2 that’s a big part of what we’re seeing in terms of potential revenue upside or revenue growth. And in addition from a product mix standpoint just again a reminder, advanced technology broadly read but HDI, rigid-flex, and substrate that were selling into that marketplace.

Okay, so I suppose for a little bit more clarification, is there a thought process or belief that that diversification, that number, that 25% do we feel that based on what we’re ramping with to whatever particular insight into the programs that you are looking at this year, we’re going to be growing that 25% as a percentage of mix this year or is that just really too difficult to ascertain today?

I think it is very difficult to ascertain as we -- because of the seasonal nature of that business and because of the second half ramp cycle that changes that revenue mix it is very hard to forecast. Of course we look at, we like to have a spread of major customers in all of our end markets, and we’ll continue that effort. We’ll continue that positioning and clearly there are times when it does benefit us and again it just helps us when we look at more challenging quarters to have that good spread. And of course more broadly across is the end markets and it is the reason that it’s so important that we have that diversified position in our end markets.

Okay, thanks. Next up and then I’ll jump back in the queue, can you elaborate a little bit on the automotive qualifications that you are working through currently. Obviously there is a fair amount of time before we get into full production runs with some of that but it sounded like there are some aspects of previously qualified work that is starting to get a little bit of ramp and into production this year. So can you help us to understand a little bit more for the magnitude and also the potential tail for how that contribute to continued growth moving forward? Thanks.

Okay sure. We are as you know, we in the automotive area we were able to grow last year, year-on-year pro forma base by 9%. We’re looking to do at least that this year in automotive. We believe we can do that. Part of that growth expectation does lie on new products that had already been seated by Viasystems particularly in the radar area where really Viasystems brought that capability to TTM and had already positioned in that market. That market is certainly opening up with ADAS and I believe will continue to grow as safety systems both passive and active safety systems are of so much importance to the consumer. So we do expect to see that growth above what would be the standard 5% to 7% growth rate in that industry. So we would expect that area to grow more rapidly and yes, we’d already -- Viasystems had already seated it. As we go forward it usually does -- it is a two year approximate cycle to go through qualification and then to begin ramp. You can think of that as two to three years depending on the timing. And so HDI as an example which really TTM brings to the combination, that growth would start kicking in 2017 timeframe. We may see some small volumes before that, but that would be really new product introduction or NPI as we call it, smaller volume not really noticeable to the investors. So look at 2017 start to kick in on HDI, really kicking into 2018 and that’s our goal.

That’s great insight folks, thanks so much.

Thank you.

[Operator Instructions]. And our next question will come from Matt Sheerin with Stifel.

Yes, thanks a lot and hello everyone. Just a few questions, just another question related to your handset business and your biggest customer there. It sounds like that’s all demand related and not share related and maybe you can clarify that. But as you look through the end of the year I know that visibility is limited at this point, but are you expecting kind of a normal ramp and of course last year the ramp was different, two years ago you had that big product cycle, do you have any sense of how that’s going to play out for you this year?

First of all I wish I had the crystal ball to just give you -- a little bit of color Matt. I think as you pointed out this is an upgrade cycle. We saw something similar to this two years ago in 2014. Just as a reminder in 2014 our EPS was impacted and we had a second quarter our EPS was $0.05 and now you can compare that to the guidance of a more diversified TTM. And we are certainly thrilled to see that strength coming from other markets. On the cell phone side what we are expecting at this point would be a ramp, what I would call a traditional ramp in the third quarter and fourth quarter. Again you can use 2014 as a proxy for what we would be expecting in terms of the third quarter and fourth quarter ramp. And we will be pushing forward, we’re on schedule in our prototyping and inner qualification for that ramp. We believe that we are positioned and we are always focused on positioning properly for that ramp. And certainly nothing there that would lead or indicate that there would be anything unusual about that ramp. I think there is a good expectations for what will be coming out in the fall in terms of new models.

Okay, that’s very helpful. And just moving to some of your other businesses on the network communication side, I know you’ve typically seen an uptick in the June quarter, more selling days particularly in Asia, it sounds like it is going to be flat to up a little bit so some weakness there, could you talk about the two different parts of the business the telecom business and the networking. I know you have a lot of exposure to the China Telecom and build out there. So what are you seeing in those markets?

And you are right. I think we will see that mild uptick in the second quarter. We are seeing on the networking side which now if you look approximately Telecom at about a third and networking at the balance. In the networking side it is just been a mix picture from really moving from customer-to-customer. So there it has been -- it has been rather difficult for the last couple of quarters to forecast but we are seeing improvement in some of our customers there. On the telecom side as I mentioned earlier there has been a partnership announced between China Telecom and China Unicom on their 4G investment. And that was a partnership designed to leverage their investment. The sense that we have from the market is that they are working to the resulting inventories of base stations and that again there might be a mild improvement here as we go through the course of the year. There is certainly still the unbilled potential in the 4G infrastructure in China. On top of that we are starting now to see the India rollout occur, which is a positive and a slightly better environment in the U.S. as well.

Okay and then just lastly regarding the synergies, I know Todd you talked about being at 90% either in execution or actually results but if you look at your guidance for the second quarter, so roll that up at the first two quarters of the year what percentage of the synergies is reflected in that operating margin and the results, are we at 70% or…?

We are moving along quite nicely, so we estimated that we probably had about $8 million of synergy benefit in the P&L in Q1 which was more or less on track with the guidance that we have been giving. And we’ll expect that to uptick another increment here for Q2. So probably more in the neighborhood of plus minus 11 million so that you are almost fully getting the benefits. And then going into Q3 when the full 55 is implemented we should see the more of the 14 million kind of a run rate per quarter starting in Q3. So we are building each quarter, Q1 was about 8, we expect Q2 to be more in the 11 neighborhoods, and then Q3 will be at full board.

Okay and then looking at margins that I know you haven't talked about targets and perhaps you’ll talk about some of those targets at your Analyst Day but assuming you see normal ramps in some of your end markets at the end of the year in addition to the synergies you should see some nice leverage just on your assets right?

I would agree with that. I think you can see the leverage that we have been enjoying now if you just kind of isolate the cellular phone market impact, right. You can see the benefit that we’re achieving and deriving from that in our results here and in our projections for Q2. So I think your assumption is a valid one. We still are very much believers that the 10% operating margin is very doable. If you kind of look at where we have been on our journey the last few years, Tom keeps referencing and I do too, two years ago we were in kind of similar cellular phone cycle with our big customer and if you go back there, early in the year Q1 and Q2 our operating margins were right around 3% -- 3.1%. Last year if you kind of combine the two companies and look at it that way, we were more in the neighborhood and in Q1 we were like 4.8% and this year we are at 5.7%. So, you can see that on a combined basis we are building and obviously Q1 and Q2 are usually our lowest quarters because of that seasonal ramp in the second half of the year. And so we are building and kind of trying to lift that -- keep moving up to the right and keep moving to a higher plateau each year. So we still feel good about the target. We are obviously going to need a little more help on the revenue side and in growing our advanced technology presence. Tom talked about that in the automotive market that will take a couple of years to fully take hold. And we will continue to expand into other markets to take advantage of that capacity in the front half of the year, that is where we have the biggest opportunity. And then the second half of the year we come pretty close to that target now. So, I think this year if it plays out the way we are hoping, that is not an unrealistic target. I think we will get in the neighborhood.

Okay, alright, thanks very much.

Thank you Matt.

[Operator Instructions]. At this time I show no further questions in the queue and I turn the conference back over to Tom Edman for any additional or closing remarks.

Okay, I would like to thank everyone again for joining us and just wanted to summarize some of the major points that we made in the call. First, we delivered solid results for the first quarter. We beat the high-end of our non-GAAP EPS forecast as well as consensus largely based on broad-based operational execution. Second, our diversification initiatives are paying off as relative strength in our automotive and aerospace and defense end markets has really offset weakness in the cellular phone end market. Third, we have implemented or announced actions for more than 90% of our synergy target associated with the Viasystems acquisition and we repaid $76.5 million on our term loan consistent with our deleveraging strategy in March. We look forward to seeing all of you at our Analyst Day on May 17th and you will have a chance there to meet not just Sameer and Todd and myself but also our Business Unit Presidents. Look forward to seeing you then. Thank you.

That does conclude our conference for today. Thank you for your participation.