Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the TTM Technologies Fourth Quarter 2019 Financial Results Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will open for questions. [Operator Instructions] As a reminder, this conference is being recorded today, February 5th, 2020. Sameer Desai, TTM's Senior Director of Corporate Development and Investor Relations will now review TTM's disclosure statement.

Thank you, Brad. 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 the 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 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 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 [ph] 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 will now turn the call over to Tom Edman, TTM's Chief Executive Officer. Please go ahead. Tom.

Thank you, Sameer. Good afternoon and thank you for joining us for our fourth quarter 2019 conference call. I'll begin with a review of our business strategy including highlights from the quarter followed by a discussion of our fourth quarter results. Todd Schull, our CFO, will follow with an overview of our Q4 2019 financial performance and our Q1 2020 guidance. We will then open the call to your questions. I am pleased to report that in the fourth quarter of 2019 TTM generated revenues and EPS above the guided range. Strong year-over-year growth in aerospace and defense, cellular and computing offset year-over-year declines in other commercial markets. In addition, we recovered from the operational challenges in Q3 with solid execution in Q4, in both our aerospace and defense and commercial business driving strong margin improvement sequentially despite flattish revenues. Finally, financial discipline drove cash flow from operations to a strong $130.1 million in the quarter. For the year, cash flow from operations was $311.9 million compared to $273.1 million in 2018 despite declines in revenue and profit year-over-year. Two weeks ago we announced that we will be divesting our mobility business unit to AKMMeadville, a Chinese consortium for $660 million in cash. This was a strategic decision which allows us to focus on longer-cycle markets and reduces our exposure to short product cycle and seasonal consumer markets, which historically have been prone to volatility. In addition, cellular market growth has slowed, but still requires substantial capital investment, making it challenging to meet our desired business model. We were pleased to find a buyer that had product synergies as well as capital resources to invest in the cellular market to support our customers and the 7,500 employees associated with this business unit. The transaction is expected to close towards the…

Thanks, Tom and good afternoon everyone. As you can hear, I've got a bit of a cold. So if you hear my voice fading in and out, please bear with me. For the fourth quarter net sales were $719.3 million compared to net sales of $711 million in the fourth quarter of 2018 and compared to third quarter 2019 net sales of $716.8 million. The year-over-year increase in revenue was due to growth in our aerospace and defense, cellular and computing end markets, partially offset by declines in our networking and communications, automotive, and medical, industrial and instrumentation end markets. GAAP operating income for the fourth quarter of 2019 was $49.4 million compared to $42.8 million in the fourth quarter of 2018 and $36.4 million in the third quarter of 2019. On a GAAP basis, net income in the fourth quarter of 2019 was $25.3 million or $0.21 per diluted share. This compares to net income of $52.5 million of $0.42 per diluted share in the fourth quarter of last year and $15.9 million or $0.14 per diluted share in the third quarter of 2019. The fourth quarter of 2018 results reflect the release of a tax valuation allowance of $43.6 million. The remainder of my comments will focus on our non-GAAP financial performance. Our non-GAAP performance excludes acquisition-related costs, restructuring costs, certain non-cash expense items and other unusual or infrequent items. We present non-GAAP financial information to enable investors to see the Company through the eyes of management and to provide better insight into the Company's ongoing financial performance. Gross margin in the fourth quarter was 17.6% compared to 17.5% in the fourth quarter of 2018 and 14.8% in the third quarter of 2019. The year-over-year improvement in gross margins was due primarily to the changes in revenue noted…

Thank you. [Operator Instructions] And we'll take our first question from Matt Sheerin with Stifel.

Yes, thank you and good afternoon. Just first question regarding the extended shutdown in your China facilities regarding the coronavirus. How should we think about another extension, let's say, another week or so? Is it sort of in that $0.09 for every 10-day type of or more or less from that? And then -- and if indeed the workers come back at the scheduled time, would you expect any distractions maybe less people coming back which could hinder production ramps as you get back to work?

Matt, those are really good questions. So let me answer the second one first. In terms of, I'd say a trickling effect of employees coming back, we know there's going to be some quarantine requirements. We have tried to comprehend to that in our guidance that was provided. So that's part of that $0.09 of bad news that we're attributing to the coronavirus. To your second point, what if it gets extended. It won't be the same magnitude because we've kind of -- it just moves the trickling effect a little farther down the road, if you will. So it won't be quite the same magnitude. Roughly half of that, I would suggest is probably the impact if we continue to decline a week at a time. That's the best we can see at this point. It's obviously a very fluid situation and we're getting updates almost daily, not only from the government in terms of what's going on, but also from our own internal folks as we communicate with our workers.

Yes. And I guess the other issue is that other parts of the supply chain are also under constraint and if they don't come back have places to ship and I'm sure you're talking to customers. I guess the last follow-up to that is whether or not you would see these orders just get pushed out and you would make some of that up in Q2.

So, yes. Thank you, Matt. A few things going on there, a few aspects to that question. Yes, absolutely, we're remaining close to our vendors as well most of whom have China-based facilities and we're coordinating with them to try to mitigate impacts, but obviously that is a major factor here. And in terms of the customers and coordination with the customers, you're right. As we come out of this, we're going to be making sure that we do our best to meet customer requirements and prioritize and we're working with them to prioritize their production needs. And there is also a piece of this that we can manufacture in our facilities in North America or in Hong Kong. So we're also trying to certainly support QTA requirements out of those facilities. So yes, I mean it is -- this is, as you know, it's a logistics exercise right now to try to plan for coming out of new year -- Chinese New Year and do our best to then meet customer needs. If -- yes, you're not going to see -- these aren't orders that are going away. These are orders that we're going to do our best to service either as we come out of Chinese New Year out of our existing facilities and at the end of the day it may result in delays in certain aspects of production.

Understood. Okay, that's it for me. Thank you.

Thank you.

We'll take our next question from Steven Fox with Cross Research.

Thanks. Good afternoon. Sorry, another question on the impact of the coronavirus. What you're talking about from a financial impact doesn't contemplate any impact if your customers may be down for longer or have different types of supply chain issues. This is just the direct impact that you see on your plan at this point, right?

That's correct.

Okay. And then when you think about sort of the supply chain, have you got any indications or are you seeing any kind of activity that would maybe even suggest customers would be anxious to pull in orders as much as they can, given that maybe the supply chain to be disrupted for a longer period of time?

Yes. So best way to respond to that, Steve, right now the -- so number one, I have to be -- our customers are really working with us and understanding of the situation. As you know, they're dealing with an industry and printed circuit boards where 70% approximately of board production is in China. So they recognize the challenges there. And so there are -- there is movement in terms of how they prioritize products. And that -- and so sure that can be pull-ins in certain places and also can be push-outs in products that they're de-prioritizing. So right now it sort of goes both ways in terms of our dialog. And of course, all of this is planning at this point because we won't be back in production. If all goes according to plan at this point, we won't be back into production until early next week. So that's the kind of coordination that's occurring right now.

Got it, appreciate the color. And then switching gears to your end markets, you mentioned that you're seeing -- you mentioned a better demand or recovery in semi-cap and data center demand. Can you sort of talk about what that means, like what kind of slope of recovery are you factoring in? And then I have one other follow-up. Thank you.

Yes. No -- thank you. I think if you look at semiconductors -- so semiconductor capital equipment requirements, which really fall into our MII area, we've seen a pretty steep acceleration in terms of requirements there. And as you know, that's a business that it moves up very rapidly. I think you're going to see some sustained requirement, strong requirement there for the next several quarters. Hard to sort of look beyond that into the -- towards the end of the year, but a very -- I think a positive -- certainly a positive upward trend that we've seen starting early Q4 and really moving through what we're seeing in Q1. On the data center side, we saw ramps restart again in our Q4 and certainly look to be strong, again, at least through the first half of this year and then we'll see how visibility develops beyond that. But -- yes, we've been pleased to see that that period of digestion on the data center side at this point seems that our customers have moved through that. They are now ramping on new programs. Those ramps typically will be two quarter to three quarter kind of ramps and they're staggered a bit depending on the customers. So, good to see that kind of momentum right now in the data center side.

Got it, that's interesting. And then just very last point, you've had some excellent growth in aerospace and defense in the last couple of years. You highlighted why it can't continue. But can you just sort of add around the edges why that growth maybe doesn't slow down after the last couple of years. Like what would be the one or two more salient points to the fact that [indiscernible] going on?

Yes, sure. Yes, so I think there are two real factors as far as TTM is concerned. One as we are seeing requirements and broad technology requirements in aerospace and defense and they are sort of reflective of what you see on the commercial side of the business around 5G, but increased requirements in terms of the lines and spacing for boards, in terms of RF related requirements. And those requirements being pretty broad in terms of programs requiring advanced technology. So that gives us a strong feeling of confidence in this market. And then, over and above that we have really radar growth that's going to drive the -- AESA radar installations and that will -- that wave of demand should continue for a good long time because of the fixed radar installations that are out there that need to be upgraded or replaced. So you're looking at a multi-year requirement there for radar and radar technology shifts. So our determination in this market is to continue to engage and move forward in terms in that engagement. Certainly an RF is the first priority but more broadly as we bring in our advanced technology capabilities out of the new Chippewa Falls facility to be able to supplement what we're doing in RF with what we're doing more broadly in printed circuit board technology to improve our upfront engagement with those customers. So I think we've got the right strategy in place and certainly the market momentum continues to be there for TTM.

Got it, that's helpful. Thank you very much.

Thanks, Steve.

Thank you. Our next question comes from Mike Crawford with B. Riley FBR.

Thanks. Continuing on the aerospace and defense theme, well, we did like Raytheon's 1.5% book-to-bill in the fourth quarter, but are there any particular new programs you're looking to get funded when we see the new fiscal '21 DoD budget request later this month?

So, if you -- I'll just answer it broadly. I think any program that involves extensive radar replacement those are programs that we're keenly interested in. We will certainly highlight major program wins. Last quarter we highlighted LTAMDS, which really is the Patriot missile upgrade. And that program win -- that was a really good one in terms of TTM content. And so, if you're looking at -- as we look at programs, we look at spending plans, we are encouraged by a couple of things. I think -- I talked about the radar. We are also encouraged by the attention to space and space requirements and that's going to again push the boundaries of technology. And when you're looking at pushing lines and spacing, pushing reliability requirements, those are opportunities for us. And so as you -- that's the other sort of category of programs that I would keep my eyes on. And definitely encouraging to see a real emphasis out there on the technologies that are required going forward. So very positive climate for us on the aerospace and defense side.

Okay, great. Can we add hypersonics to that as well as some space?

You can, absolutely. Hypersonics fit right into -- right into that category. And as you can imagine hypersonics, you are going to be looking at lines and spacing, again sub 100 micron towards heading into the 50 micron type lines and spacing, if not below, in order to accommodate some of the chipsets that are being developed. So, yes, that's a real positive.

Okay, great. And then just one other question on the automotive vertical, you obviously are growing the advanced technology piece, which is I think 23% in the latest quarter. When do you think it is the...

That's right.

Tipping [ph] point where that becomes over 50%?

So -- actually it's 23% in the last year.

Okay.

So that was the full-year number and that was up from 19%. We try to update that every year. The previous year it was about 13%. So we went from 13% to 19% to 23%. I don't think we're -- frankly, I don't think we're going to get to 50%. I think it's entirely possible we could move up towards somewhere between 30% and 40%. The reason for that is that EVs are still going to demand substantial -- there are going to be substantial requirements for heavy copper standard -- heavy copper conventional printed circuit boards. Those are still very difficult to build, because of the voltages that you're running through those boards. So these are very complex conventional boards, but they are in the conventional category. And then, of course, you're going to have the additional requirements for sensors, the additional requirements for infotainment, but you're still going to have that base need for conventional boards. And I don't see that changing as we go forward. So conventional board should continue as we again as SAR [ph] starts to come back, we should start to see growth come back on the conventional side. And then what you'll see is a higher growth component to the advanced technologies.

Okay, great. Thank you.

Thank you.

Thank you. [Operator Instructions] We'll take our next question from Mike Cikos with Needham & Company.

This is Mike Cikos from Needham. Just on the auto end market, I'm interested, can you kind of walk us through -- I understand the challenges that that market is seeing on the demand front, but you guys continue to win programs there, especially on the ADAS side. How is the health of that market currently, just from a new program perspective, putting aside demand. I'm just interested in how ebb and flow of that market is.

And, Mike, specifically to the automotive market, correct?

Correct. Yes.

Yes. So I would say that -- and as we highlighted and as you can see in the trends, we're still -- the number -- the wins that we're gaining in terms of the new technology area and particularly in the ADAS space, are continuing to maintain strong momentum. So we're still seeing very good innovation there and I would expect that to continue. We're still seeing a lot of activity, frankly on -- out of China, as well as what we see out of the US. So even with the industry struggling, I think there is a strong acceptance that these are -- the innovation is critical to the future and that that is an area of emphasis and continued commitment from customers. So, I don't see a major change in the pace in terms of our design wins and also the innovation that's occurring on our customers' side. And I think the -- we tried to show that with the data. If you would think about 58 automotive design wins that is up from the previous year, I expect that trend will continue as we go forward.

That's helpful. And then if you could also just delve a little deeper into your compute and storage peripheral end market as well as the medical, industrial end markets. I'm just interested in I guess how Q4 played out versus your expectations.

As we look out through the course of 2020 specifically or Q4, how did we do against expectations in Q4?

I was looking more at Q4.

Okay, sure. So if you look at computing, we actually really did well in computing based against our forecast in Q4 we saw that data center strong growth where we actually saw semiconductor activity pick up as well and both areas and particularly I'd highlight so while data center was a good -- nice steady build. And what we saw in the semiconductor side was a much more rapid and urgent requirement as we sort of progressed through the quarter. So really strong developments there and over what we had forecast. So that was great. On the MII side, actually, we ended up pretty much on where we had forecasted for MII. I would highlight just the inside of that. We saw more weakness than we expected in industrial and that was then what we saw on the instrumentation side there was more strength than we expected. So I highlighted earlier the semiconductor capital equipment requirements, very strong and stronger than had been forecast as we came into the quarter. And then that was balanced by industrial being weaker than we had expected in the quarter. So that's where the movement was. Medical continued to chug along pretty well.

Okay. And just building on that, back to the computing, I know that you said the data center demand was relatively steady whereas the semi was more rapid, more urgent. Is that...

Yes.

Just a reflection of those different end markets on how they typically move or was this new as far as that more rapid and more urgent demand coming out of semis?

No, I would put that, yes, that's not untypical and with the data center demand it's -- and so we had forecast growth there. We saw stronger growth in data center than we had expected. And so what I meant by steady is the steady ramp that we saw through the quarter on data center. Yes, on the semiconductor side, not unusual. Most of our Board requirements go into test and burn in requirements in semiconductor and so they are tied to innovation. And if our customers have a drive, if there is a program drive for a new platform or a new capability that's when we see these spikes. And so that can be subject to pull-ins, that can be subject to demand that's higher than we forecast. So not unusual to see changes there that are a little bit outside of our forecast.

Okay, great. Thank you.

Thank you.

Thank you. And we have no further questions at this time. I would now like to turn the conference back to Mr. Tom Edman for closing remarks.

Sure thing. I'll just close by summarizing some of the points we made earlier. First, we delivered earnings above the guided range, we generated strong cash flow, we recovered from operational challenges last quarter. Second, we announced the divestiture of the mobility business unit, which will reduce the volatility we have always historically seen in our business performance. And it's also fits well with our core strategies of diversification, differentiation and discipline. And finally, I'd like to thank our employees, customers and investors for their and your continued support as we navigate the challenges to our businesses. And I particularly want all of us to think about and certainly we do a lot of thinking about the well-being of our employees as they deal with a challenge with the coronavirus in Hong Kong and in China. And I know you share the same feelings and certainly our thoughts are with those employees. And we all are looking for the impact here to be short-term in nature as we continue at TTM to focus on our – on the longer-term strategic focus areas of diversification, differentiation and discipline. Thank you for joining the call. Goodbye.

Ladies and gentlemen, this concludes today's call. We thank you for your participation. You may now disconnect.