Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the TTM Technologies First Quarter 2022 Financial Results Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. [Operator Instructions] As a reminder, this conference is being recorded today, May 4, 2022. Sameer Desai, TTM’s Vice President of Corporate Development and Investor Relations will now review TTM’s disclosure statement.

Thanks, Danielle. 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 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 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 be considered -- 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. We have also posted on our website a slide deck, which we will refer to during our call. I will now like to 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 first quarter of fiscal year 2022 conference call. I will begin with a review of our business highlights from the quarter and a discussion of our first quarter results, followed by a summary of our business strategy. Todd Schull, our CFO, will follow with an overview of our Q1 2022 financial performance and our Q2 2022 guidance. We will then open the call to your questions. The quarter’s highlights are also referenced in slide three of the investor presentation posted on TTM’s website. In the first quarter of 2022, TTM delivered revenues at the high end of guidance and non-GAAP EPS above the midpoint of guidance, despite a challenging supply chain and the labor environment, and the continued impact that COVID-19 is having on our operations. Revenues were up 10.4% year-on-year, as commercial end markets performed better than we expected. Our employees did an excellent job of maximizing production, despite ongoing operational headwinds, including supply chain constraints for ourselves and our customers, inflationary pressures and continued labor challenges in North America. During the first quarter, we mitigated virtually all of the material price increases through additional cost savings, adjustments in mix and product price adjustments. Last quarter, we discussed the pay adjustments that we plan to make during the first quarter of this year in North America to increase our competitiveness. Since then, we have seen a general improvement in our ability to attract and retain talent, though the continued tight labor conditions remain challenging. The price increases that will offset these higher compensation costs are still anticipated to have a positive impact on our margins through the balance of the year. I would also like to update you on our COVID situation. COVID-19 impacted our employee…

Thanks, Tom, and good afternoon, everybody. I will be reviewing our financial results for the first quarter that are also shown in the press release distributed today, as well as on slide six of our earnings presentation, which is posted on our website. For the first quarter, net sales were $581.3 million, compared to $526.4 million in the first quarter of 2021. The year-over-year increase in revenue was due to strong growth in virtually all of our commercial end markets, which more than offset a decline in our aerospace and defense market due to commercial aerospace softness and production challenges in North America. GAAP operating income for the first quarter of 2022 was $25.9 million, compared to $19.8 million in the first quarter of 2021. On a GAAP basis, net income in the first quarter of 2022 was $17.2 million or $0.17 per diluted share. This compares to a net loss of $3.2 million or $0.03 per diluted share in the first quarter of last year. The remainder of my comments will focus on our non-GAAP financial performance. Our non-GAAP performance excludes non-routine tax items, M&A 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 facilitate comparisons with expectations in prior periods. Gross margin in the first quarter was 15.9%, compared to 16% in the first quarter of 2021. The year-on-year decline was largely due to labor and production challenges in North America, partially offset by revenue growth in our commercial businesses. During the quarter, we did experience significant material cost increases, but we were able to mitigate the profit impact of those increases through manufacturing efficiencies and other price increases. Selling and marketing expense was…

Thank you. [Operator Instructions] We will take our first question from the line of Jim Ricchiuti. Please go ahead. Your line is now open.

Hi. Good afternoon. A couple of questions. Just first on gross margins, I know there’s moving parts here, but is it fair to characterize the Q1 gross margin as a trough here, because we have got, it sounds like a little better mix coming up in Q2 with a higher A&D volume and I don’t know if the COVID pressures that you alluded to have continued in areas like China, but I am wondering how we might think about gross margins?

Well, all things being equal and that’s a big qualifier, right? But generally speaking, in a cycle now when you look at our seasonality, Q1 is always going to be a very challenging quarter primarily because of Chinese New Year. And so that always puts pressure on revenue and costs to try to work our way through that holiday season. This year, that is a little more pronounced because of the strategy that we implemented regarding compensation in North America to increase our competitiveness and in stabilizing our workforce and attracting new workers into our business. And so as I indicated last quarter when we had this call, we were expecting a pretty significant short-term hit in Q1, because we are implementing these costs and I have estimated those costs to be around 130 basis point margin hit in Q1. We also mentioned that we have taken actions to mitigate those costs through price adjustments back in December, but it will be a timing issue before those adjustments actually begin to show up in our P&L as a result of a pretty significant backlog and so we have to work through those backlogs before the new pricing really takes effect. So Q1 is definitely a low mark. You see our Q2 coming back. And absent some dramatic shifts in the economy, we would expect to regain and improve as we go through the year as a result of these price increases starting to take effect more in the second half of the year.

Got it. And a question on the new facility going into Malaysia, first off, and I may have missed it, I am sure you mentioned it, but when do you expect that to be up and running? And the bigger question that I had is, just as it relates to the new facility, you have talked in the past about introducing more automation into your facilities and I am wondering if there’s anything you are doing differently, I know that you still have benefits from low labor costs there, but if there’s anything you are doing differently in terms of the type of equipment, the automation that you might be...

Yeah.

...incorporating in this facility? Thanks.

Yeah. Sure, Jim. Yeah. So the facility in Malaysia will be starting its ramp in the second half of next year and then we will be gradually ramping that capacity sort of like the end of 2024 we should be close to full capacity. We do have room for an additional 25% or so of ex-additional Phase 2 capacity in the plant building. But first things first, we are going to bring this up throughout 20 -- latter half of 2023 into 2023, 2024, should be at full in 20—at the end of 2024, really 2025, and then we will be looking at what to do going forward. From an automation standpoint, absolutely right, we have been automating our facilities over time, but that’s -- in that case, we are actually going back and incorporating automation into the facilities versus being able to start from a greenfield approach. So what you will see in this facility, it’s a single floor, you are looking at a facility that’s approx a little bit more than 700,000 -- about 750,000 square feet. So a very large single floor facility. We are going to be optimizing production flow. And then the automation and when we use the term automation, we are talking not just about robotic loading, we are talking about robots being incorporated into the equipment itself, the plating equipment being a great example. But we are going to be taking -- it’s going to be a great opportunity to incorporate automation from the front of the line to the back of the line, as well as Industry 4.0 practices from the standpoint of how we share the data, bring the data in from the various platforms and then use that data to optimize our production and our yields. So, yeah, we are going to be taking -- this is a facility you can -- yes, certainly located in South East Asia, but we are looking at optimizing that revenue per employee in the facility through the use of automation.

Thank you.

Thank you.

We will take our next question from the line of Mike Crawford. Please go ahead. Your line is open.

Thank you. Just further to Malaysia, how much of the capacity of that facility once it’s fully ramped up around the end of 2024 is expected to be shifted from some of your Southern China operations versus any new business won from customers? And then ancillary to that is, what are you looking for that would then reload your China capacity?

Yeah. So, and of course, that’s -- it’s difficult to say, Mike, for sure, right, because we have programs that are ongoing in China that almost certainly will stay in China. We have programs that may be early in life where the customers are going to say, okay, but let’s put that program into South East Asia combined with China and then we may see a little bit of transfer from China into Malaysia. But that will be pretty insignificant. I mean, I think, as we look at it somewhere, if you are looking at a facility of size of about $180 million in revenue, looking at 10%-ish of that being potentially transfer. But, again, not a bad thing, because it’s going to help us with the startup efforts, but it’s something that as we talk to our customers and as they go through their program planning, we are expecting to be relatively insignificant. The critical advantage here for our customers is that if -- they will be able to cross-qualify program. So put a piece of the program into South East Asia or at least a qualification effort in South East Asia and know that they have an option outside of our China facilities and vice versa. You do the same thing in terms of placing business in the South East Asia with the option of ramping either in South East Asia or in China. So that’s the real opportunity here from a customer standpoint.

Okay. Thank you. And then, just switching gears slightly, you mentioned the new equipment being installed to support your automotive efforts, because you are at capacity now. So what kind of lift in capacity will you get from that? And then, I guess, I am going to go ancillary to that question as well is, when automotive be one of the main verticals that would lead you to continue your search for additional regional capacity in Europe?

So the answer on the first side, it’s actually part of an effort that we have in upgrading the facility. So you are not going to see huge incremental capacity. We will see a moderate level of capacity increase and you can think about that as on the order over time of approximately $20 million. But the real important aspect of the equipment that we are putting into our automotive facility is that we are upgrading that facility and also incorporating more automation as we do so and then it replaces equipment that is out of date, if you will, or equipment that is less optimal. So that’s what we are doing there. And of course, as you install equipment, it’s a little bit disruptive to production flow. So that’s where we lose a little bit of the incremental capacity for a quarter and we will be right back at it next quarter. Europe was the other question, right, so...

Yeah. Yeah.

Yeah. As we -- as -- and certainly from a quick turn standpoint, we continue to be on the watch for what we might be able to do in Europe to support automotive, but also medical, industrial and instrumentation customers in Europe. That’s an area that we have been making some progress on. And so as we look at our product mix, our European business continues to grow. It’s MII, automotive and actually a little bit of aerospace and defense. As we look at continuing to build out our footprint, that’s certainly the one area that we haven’t yet got the right to the right facility for and so we will continue to look there. Certainly, with South East Asia coming on in a year, that’s going to be a big area. That’s the real focus for us in terms of volume manufacturer. And while our automotive customers are satisfied with our capacity in China and looking to even see us build on that over time, it’s really our other customer sets in data center, networking and medical, industrial and instrumentation that where they are looking for that supply chain resiliency piece.

Okay. Well, great. Thank you very much.

Thank you.

[Operator Instructions] We will take our next question from the line of Travis Bucknall. Please go ahead. Your line is now open.

Hi. Thanks for taking my question. I am calling on behalf of Will Stein today. I know you have touched earlier, you touched on how COVID has impacted your operations. Can you please also tell us if or how you are seeing any supplier demand disruptions from the ongoing war in Ukraine?

So the -- so supply chain disruptions from the COVID situation?

Ukraine.

Well, I am wondering...

Oh! Well, Ukraine and Russia. Ukraine and Russia. Okay. Understand. So -- yeah. So in terms of the Ukraine and Russia conflict, the biggest -- there really haven’t been direct impacts in terms of the supply chain. What we are seeing are more what I’d call indirect and that indirect impact has been on metal pricing, particularly if you look at palladium pricing and copper pricing, bouncing all over the place is one way to put it. But we did see increases early in the quarter as the conflict began, lately we have seen that’s shifting a bit. We are expecting an impact in terms of our costing as the copper pricing, in particular, flows into laminate. But those increases are -- have -- we have contemplated the potential continuing inflationary impacts as we looked at the price adjustments that we had to make back in December. So our view is that we will be able to absorb those at least short-term, and again, watching what is a pretty volatile metal pricing environment to see if there’s any real structural cost changes that flow through. So far I think we are in fairly good shape there.

Okay. Thank you. And then, I have a similar follow-up. I am curious if you have been seeing that this war has triggered any accelerated design or production activity in your military end market?

So -- yeah. Interesting question. We have some historical content there with some -- several programs that have been impacted, where inventories are being drawn down. It does take a while. As you know, when budgets are passed, it usually takes a year, a year-and-a-half for the budgets to then impact us in terms of actual program release. In this case, as you watch inventories come down, you can sort of take the same view, it’s going to be something that over the course of the year, we will probably start hearing about from customers and would be a positive -- it would have a positive impact on us. But, again, relatively small, but certainly, a positive development in terms of demand, yes, as we look through sort of the back half of this year into next year.

Thank you.

Thank you.

[Operator Instructions] There are no further questions at this time. Mr. Edman, I’d like to turn the conference back to you for any additional closing remarks.

Thank you, Danielle, and thank you all for joining us. Just wanted to emphasize some of the points that I made earlier. First, we delivered revenues at the high end and earnings about the midpoint of guidance. We did that in the phase of production and labor inefficiencies in North America and global inflationary pressures. Second, our end market diversification allowed us to again experience solid year-on-year revenue growth of 10.4%. Third, we used our cash generation to continue to repurchase our stock. And fourth, we continued to take major steps in moving our strategy forward with differentiation with the expansion into Malaysia, as well as the Telephonics acquisition. I’d just like to close by thanking all of you again for joining this call and we look forward to your continued support as we move into next quarter. Thank you very much.

This concludes today’s call. Thank you for your participation. You may now disconnect.