Tony Righetti - IR, The Blueshirt Group Thomas T. Edman - President and Chief Executive Officer Todd B. Schull - Executive Vice President and Chief Financial Officer.

Prabhakar Gowrisankaran - Canaccord Genuity Inc Matthew David Rold - Needham & Company, LLC Matthew Sheerin - Stifel, Nicolaus & Company, Inc.

Good day and welcome to the TTM Technologies First Quarter 2015 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Tony Righetti with The Blueshirt Group. Please go ahead, sir..

Thank you, operator. Before we get started, I would like to remind everyone that comments made on today's call may contain forward-looking statements. I wish to remind you that any forward-looking information we provide is given in reliance upon the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

The comments that will be made today are management's best judgments based on information currently available. Actual results could differ materially from any implied projections due to one or more of the factors explained in the Annual Report on Form 10-K and other documents that the company files with the Securities and Exchange Commission.

TTM does not undertake any obligation to publicly update or revise any forward-looking statements, whether as the 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 and the risk associated with TTM's proposed acquisition of Viasystems Group, Inc., which may be found in the current reports on Form 8-K and the registration statements on Form S-4 that have been filed by TTM with respect to the proposed acquisition and the company's other SEC filings.

In addition to the financial measures prepared in accordance with GAAP, we will discuss on this call certain non-GAAP financial measures, such as adjusted EBITDA.

Such measures should not be considered as the substitute for GAAP and we direct you to the reconciliation included in the company's press release, which was filed with the SEC and is available on TTM's website at 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, Tony. Good afternoon and thank you for joining us for our first quarter 2015 conference call. I will begin with 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. Let me start with a review of highlights from the first quarter.

Net sales in the first quarter were $329.2 million. GAAP net income was $3.4 million or $0.04 per diluted share. Non-GAAP net income was $10.8 million, or $0.13 per diluted share. We had a strong start to the year compared to our initial guidance Q1 revenue was at the upper end of our range and non-GAAP earnings exceed our expectations.

In our cellular phone end market broad based demand continued into the first quarter following the Q4 seasonal peak and drove strong year-over-year top and bottom line increases.

We are encouraged by the solid sell through rates that have continued, this combined with our product prototyping activities bodes well for this end market and TTM as we enter Q2 and prepare for the second half of 2015. Operationally, we executed well with solid yield performance during the quarter.

Operating and gross margins improved year-over-year due to increased volumes and a product mix shift towards advanced technology products. As expected operating and gross margins decline sequentially following the Q4 seasonal peak.

During the quarter our advanced technology work which includes HDI rigid-flex and substrate accounted for approximately 45% of our company’s revenue. This compares to approximately 37% in Q1 a year ago. Increasing the percentage of our business coming from advanced technologies continues to be a key strategy for TTM.

As these product offer better revenue and profit growth opportunities. Our overall capacity utilization in Asia-Pacific was 72% compared to 62% in Q1 a year ago and 93% in Q4. In North America capacity utilization was relatively stable at 48% compared to 47% in Q4. Now moving on to our end markets.

Overall, the fundamentals underlying our end markets remain healthy. The first quarter is historically been our seasonal low with lower retail spending on cellular phones following the holiday season and Chinese New Year.

While seasonally down sales in our largest end market cellular phones were better than expected and accounted for 30% of revenue in the first quarter compared to 35% in the fourth quarter. The normal seasonal headwinds were muted during the quarter. As demand for smartphone products was better than expected.

The year-on-year sales increase of 131% in this end market demonstrated broad based PCB demand strength from both our major customer and other Asia based customers. We expect sales in this end market to increase in the second quarter on a dollar basis and represent 30% of total sales.

The networking communications end market represented 29% of total sales compared to 27% in the fourth quarter. Sales were down a 11% sequentially and 4% year-on-year largely due to demand moderation and inventory adjustments related to the 4G build out in China.

We expect sales for this end market to decline moderately and represent about 27% of total sales in the second quarter. The aerospace defense end market represented 15% of total sales compared to 14% in the fourth quarter. On a dollar basis, sales decreased about 3% sequentially, but were up 4% year-on-year.

Aerospace and defense bookings were strong in the first quarter registering a book-to-bill ratio of 1.19 demonstrating that we are well positioned in the right programs. We expect the aerospace defense end market to represent about 16% of total sales in the second quarter.

Reflecting seasonal trends sales in the computing storage peripherals end market moderated and represented 11% of total sales in the first quarter, compared to 10% in the fourth quarter. On a dollar basis, sales decreased about 15% sequentially and 36% year-on-year, primarily due to shifting customer allocations and seasonal weakness in tablets.

In the second quarter we expect sales and computing to strengthen due to new product introductions and represents approximately 13% of sales. The medical industrial instrumentation end market contributed 9% of total sales compared to 8% in the fourth quarter.

On a dollar basis, sales declined approximately 5% from the prior quarter so we’re up 3% year-on-year. Sales in this end market remain relatively steady due to our participation in a broad range of semiconductor test equipment, medical devices and industrial applications.

We expect sales for this end market to represent approximately 9% of sales in the second quarter. Sales in the other end market represented 6% of total sales compared to 6% in the fourth quarter. On a dollar basis sales decreased about 16% sequentially, but were up 6% year-on-year.

The sequential decrease in sales was largely due to anticipated seasonal declines in consumer programs. We expect the other end market to represent about 5% of total sales in the second quarter. In terms of our customers our top five customers contributed 47% of total sales in the first quarter of 2015 compared with 52% in the fourth quarter.

Our top five OEM customers during the quarter in alphabetical order, were Apple, Cisco, Ericsson, Huawei and Juniper. Our largest customer accounted for 27% of sales in the first quarter. The ongoing positive momentum of our business translated to a strong book-to-bill and backlog.

At the end of the first quarter our backlog which is subject cancellations increased year-over-year by $29.6 million to $217.4 million. And our book-to-bill ratio for PCBs was 1.07 and improvement from 1.03 a year ago. As a result of unfavorable product mix ASPs declined in the first quarter.

ASPs declined by 2% from the fourth quarter in both Asia Pacific and North America. In summary, we were pleased with our first quarter performance. We executed well and capitalized on better demand for advanced technology PCBs in a traditionally soft seasonal period.

The continued pace of current customer programs in cellular phones combined with strong aerospace and defense bookings as well as steady demand in our other end markets give us confidence in our outlook going forward.

We are also encouraged by the continued progress we have made in our prototyping process with a goal of improving our time to ramp and yield for a new products. Before I wrap up my discussion, I would like to briefly comment on the status of the Viasystems acquisition.

Since we have received all required shareholder and foreign approvals necessary to complete the transaction. Only the review by the United States federal trade commission and approval by the committee on foreign investment in the United States remain open. We except to close the acquisition during the second quarter and begin the integration process.

The combination of Viasystems and TTM creates an industry leader with the ability to deliver expanded capabilities from a broad global footprint to service more customers end-to-end markets. Once complete we will move forward on three key strategic components of the acquisition.

First the combination will enforce our position as one of the largest and most diversified global PCB manufacturers. With the broad technical skill set and the ability to support our customer’s product lifecycles from R&D through production anywhere in the world.

The combined company will have substantial resources to invest in support of our large and growing global customer base. Second, TTM's market position and customer base will become even more diverse with this combination.

In particular, we expect sales from the automotive segment, already an area which has been increasing for TTM, to gain further momentum due to Viasystems' established position in the core automotive applications related to engine controls, sensors and safety systems.

We are looking forward to combining TTM's advanced technologies with Viasystems' market access to improve our positioning in this growth market. In addition, Viasystems will bring complementary businesses to TTM in the medical industrial instrumentation, networking communications and aerospace and defense end markets.

This diverse market exposure will help to dilute the seasonality of the cellular phone end market.

Third, we still expect that this combination will be accretive to TTM's non-GAAP earnings per share in the first year following the closing, as we combine over $55 million in run rate synergies with the already strong cash flow and earnings generation capability of the combined company.

We look forward to welcoming the Viasystems team to TTM in the near future. Now Todd will review our financial performance for the first quarter..

Thanks, Tom and good afternoon, everyone. For the first quarter, net sales were $329.2 million, compared to net sales of $291.9 million in the first quarter of 2014 and fourth quarter net sales of $390.9 million. As Tom said earlier, the year-over-year increase in revenue was driven by broad base strength in our cellular phone end market.

The sequential decline in sales was largely due to normal seasonality. GAAP operating income for the first quarter was $8.3 million compared to GAAP operating income of $4.5 million in the first quarter of 2014 and $26.6 million in the fourth quarter.

On a GAAP basis, our net income for the first quarter of 2015 was $3.4 million or $0.04 per diluted share. This compares to GAAP net loss of $3.8 million or $0.05 per diluted share in the first quarter of last year and GAAP net income of $13.9 million or $0.17 per diluted share in the fourth quarter of 2014.

The remainder of my comments will focus on our non-GAAP financial performance. Our non-GAAP performance excludes certain non-cash expenses restructuring and impairment costs, costs associated with the early extinguishment of debt, acquisition related costs and other unusual or infrequent items as well as the associated tax impact of these items.

Additionally we exclude non-operational changes in our tax expense such as the impact of retroactive changes in the tax law. We present non-GAAP financial information to enable investors to see the company to eyes of management and to provide better insight to the company’s ongoing financial performance.

Gross margin in the first quarter was 15.7% compared to 13.3% in the first quarter of 2014 and 17.6% in the fourth quarter. The year-over-year improvement was due primarily to increased revenue at our advanced technology plants, which resulted in a higher utilization levels than in the prior year.

As well as operational improvements in certain of our plants in North America, the sequential gross margin decrease was due to a seasonal decline in sales at our advanced technology plants which lowered utilization of those facilities.

Selling and marketing expense was $9.2 million in the first quarter or 2.8% of net sales compared to $9 million or 3.1% of net sales in the same quarter a year ago and $9.7 million or 2.5% of net sales in the fourth quarter.

First quarter G&A expense was $24.2 million or 7.4% of net sales, compared to $20.9 million or 7.2% of net sales in the same quarter a year ago and $24.4 million or 6.2% of net sales in the previous quarter. Interest expense was $3.1 million in the first quarter and in the fourth quarter.

We recorded $0.5 million of foreign exchange loss in other income net in the first quarter compared to a $1.6 million gain in the fourth quarter. Our effective tax rate in the first quarter was 27% as compared to a rate of approximately 30% in the fourth quarter.

The rate decrease due to the receipt of a high technology tax incentive at one of our China plants. First quarter non-GAAP net income was $10.8 million or $0.13 per diluted share.

This compares to first quarter 2014 non-GAAP net income of $1.2 million, or $0.01 per diluted share and fourth quarter non-GAAP net income of $23.2 million or $0.20 per diluted share. Adjusted EBITDA for the first quarter was $42.5 million or 12.9% of net sales, compared with first quarter 2014 adjusted EBITDA of $29.1 million or 10% of net sales.

In the fourth quarter adjusted EBITDA was $60.5 million or 15.5% of net sales. Moving on to our segment performance. The Asia-Pacific segment had sales of $205.4 million in the first quarter, up 24% from Q1 2014 and down seasonally 22.2% from the fourth quarter.

Gross margin for the Asia-Pacific segment was 15.9% in the first quarter compared to 12.9% in the same quarter a year ago and 18.3% in the fourth quarter. The changes in gross margin were due to the factors mentioned previously.

The Asia-Pacific segment's first quarter operating income was $12.8 million compared to $4.7 million in the same quarter last year and $28 million in the fourth quarter. The North America segment recorded first quarter sales of $124.3 million, down from $126.6 million in the Q1 2014 and $127.4 in the fourth quarter.

Gross margin for our North America segment of 15.5% improved from 13.5% last year and decreased from 16.1% in the fourth quarter. The year-over-year improvement in gross margin reflects operational improvements at certain of our plants. The sequential gross margin decrease resulted from a combination of lower volume and revenue mix.

The North America segment's operating income for the first quarter was $5.6 million compared to $4.2 million in the same quarter last year and $6.6 million in the fourth quarter. Cash and cash equivalents at the end of the first quarter totaled $283 million, an increase of about $4 million from the fourth quarter.

Cash flow from operations was a strong $67.4 million, while we incurred CapEx in the first quarter of approximately $22.8 million and repaid approximately $48 million of debt in March.

Net debt was $225.1 million at the end of the first quarter, a decrease of $52 million from the end of the fourth quarter and this decrease resulted from the dept repayment noted earlier. Depreciation for the first quarter was $24.5 million.

Before I turn to guidance, I would like to provide an update on the financing activities related to the Viasystems acquisition. As you know, we received a fully underwritten financing commitment from JPMorgan, Barclays, RBS and HSBC to finance the transaction.

This means that the closing of the transaction is not contingent upon our obtaining financing. We are however, currently in the market indicating these facilities. Now I would like to turn to guidance for the second quarter. In the second quarter, we expect revenue to be in the range of $330 million to $350 million.

As a reference our second quarter revenue last year was $297.6 million. We expect non-GAAP earnings to range between $0.11 and $0.17 per diluted share. This is based on a diluted share count of approximately 84.6 million shares. We expect that SG&A expense will be approximately 10% of revenue in the second quarter.

We expect interest expense to total about $2.8 million and we estimate our effective tax rate to be between 25% and 29%. Our guidance reflects an annual pay increase similar to last year of 8% in our Asia-Pacific facilities in order to remain competitive in the labor market in China. This increase became effective April 1.

To assist you with your financial models, we offer the following additional information.

We expect to record during the second quarter amortization of intangibles of about $1.9 million, stock-based compensation expense of about $2.3 million, non-cash interest expense of approximately $2.4 million and we estimate depreciation expense will be approximately $25 million.

Finally during Q1 we sold the legal entity that owns our MAS facility that was closed about a year ago. We received $7 million of the approximately $21 million in proceeds in the first quarter and we expect to collect the reminder during the second quarter. That concludes our prepared remarks and now operator we’d like to open the line for questions..

[Operator Instructions] And we’ll take our first question from Prabh Gowrisankaran..

Hi, Prabh.

Thanks for taking my call.

How are you?.

Good..

Congrats on the really strong quarter. So I just a couple of questions one on the smartphone the strength that you’re seeing both you saw in Q1 and now you’re seeing in Q2? Do you see the seasonality changing with this or because traditionally between stronger Q3, Q4.

How do you think it will play out this year?.

This is Tom Edman. I think the seasonal aspect is still there from the standpoint that and you saw that utilization rates are certainly lower this quarter then they were in Q4. So there is still a seasonal component to the smartphone business.

I am encouraged that with both the fact the sell through has been strong but also with the off cycle introductions from some of the Asian customers that have certainly helped utilization levels in the first half. But I would still anticipate that we are going to see.

What you would call a typical Q3, Q4 ramp as the larger the bigger product introductions will still occur in Q3. So that should not change. So again there will be a seasonal aspect to it. I think we are encouraged by certainly the developments in the first quarter and what we see in the second quarter this year..

Okay.

And the second question I had was just on the North American business, looks like it slowed down a bit was that more a prototyping and networking and communications or what was driver for that?.

So overall high mix low volume area if you want to think about it that way has been down slightly in North America as we look forward in the second quarter, where we are looking at sequentially improvement in the North America business.

And as I mentioned we are really encouraged by the Aerospace and Defense booking strength and that bodes well for the second half of the year for North America...

Okay, great. Thanks for taking my question..

Our next question comes from David Rold with Needham..

Hi, thanks for taking the question.

So on the networking segment side, sorry could you give an update on the end market demand there both in the traditional side and the other?.

Sure, let’s start with the telecom side I think in the near-term certainly in the first quarter and what we see in the second quarter, we seem to be seeing an impact of it a combination of things, some inventory corrections that seems to be that there was some over ordering late last year in telecom and that is led to inventory correction.

We are also seeing the demand does seem to be down particularly in Europe and what we also are hearing from our customers in telecom is that they are looking to a stronger Q3, Q4 as they move through the inventory correction is start to see real demand coming back again particularly in China. That’s the telecom side.

On the networking side, better strength there so here we are talking about really routers and switches. So building on top of that infrastructure and as you would expect we are seeing decent strength in networking, but I would say that visibility still remains relatively limited there.

So we are cautiously optimistic on the networking piece, but let’s see how it shapes up as we go through the year. So overall for the second quarter certainly we are continuing to expect and we’ll see a relatively muted demand situation and then looking to a better Q3 and Q4 particularly in telecom..

Okay, and then on the Chinese cellphone customer side.

Could you talk about kind of distribution there has been concentration and just a little more color on how they are and how many of them there are and what kind of growth rates you are looking at there et cetera?.

So without getting too specific I think if you look at major Chinese players, we certainly supply Korea a major Korean customer as well.

So we have a large Korean customer and then on the China side you are looking at four to five customers, why the reason for the four to five is that occasionally with when we see off cycle situations we may see demand move away from a customer they come back in as they ramp up a new product.

So I think four to five customers in terms of radar China upsized..

Okay, and they are relatively similar size within that four to five or is there any stand about?.

Yes, I mean again it moves around with product introduction cycles, but relatively similar in size..

Okay, got it. Thank you very much..

[Operator Instructions] We’ll take our next question from Matt Sheerin with Stifel..

Hello, Matt..

Hey, Matt..

Thanks, good afternoon guys.

Just a couple of questions from me, the utilization rate in North America was down again obviously under the seasonality, but less than 50% and you think that’s something that you’re going to have to address at some point and is that something that you’re looking at in terms of consolidating the cost structure there was that something you are going to wait until the Viasystems deal closes and you kind of figure out the assets for [indiscernible] companies..

Yes, so first in terms of movement in the utilization. We actually saw an increase in utilization sequentially in North America. So we did see an increase there and from 47% to 48% it’s relatively flat, but slight increase. In terms of that doesn’t lessen the point that you are making on utilization.

We understand that we can do better in our North America footprint, it is a high mix low volume environment, so always utilization rates will be far lower than the high volume areas and so we would be in a situation where really you would max out at 70% and you’d be running optimally at around 60% between 60% and 70%.

As you pointed out we do continue to look at the footprint and certainly in combination with Viasystems we’ll have a larger and a broader footprint to look at North America and so we certainly will then be able to look at our footprint and look at how we can optimize..

And I would just add one at this time..

Yes, Todd..

When you look at gross margins in North America they don’t always directly correlate to utilization.

So for example if we look at and I think in my comments when I was talking about the segments I highlighted the fact the gross margins this year in Q1 for North America were 15.5%, last year they were 13.7%, but if you look at year-over-year on the utilization it actually came down a lot again we talked about that a quarter or two ago.

We added some plating capacity for technology reasons, it kind of messes with the utilization calculation formula, but in terms of profitability to the business it’s not a strong correlation as you would see in our Asia operations..

Got it. Okay, that’s helpful.

On the computing peripherals tablet business are you guiding that up sequentially I understand why it was down it sounds like the tablets and the allocation of tablets from you big customer, but when you see the strength area is that on the mobile device side or you also seeing strength in computing servers, others parts of that business?.

Yes, so as we go forward and look at the second quarter, we are seeing new product introductions and tablets in some of the computing areas as well and then file servers.

So it’s a combination of all three of those factors, but mainly if you look to the high end computing side we are seeing some new product introductions that will help drive that demand..

Okay, and then on the – with the debt down Todd do you expect interest expense to creep down a little bit next quarter and so will you be modeling around $3 million or so a quarter?.

I gave guidance for that we would expect….

Oh, I missed that..

That’s fine. Let me just go back to that number, we are looking at about $2.8 million..

$2.8 million, okay..

It might be down a little bit within 100,000 of that number, but that’s the cash interest expense that we expect..

Got you. Okay, and then let’s see, well I think that’s it from me. Thank you very much and best of luck..

Thank you. End of Q&A.

And it appears there are no further questions at this time, so at this time I’ll turn conference back over to management for any additional or closing remarks..

Okay, this is Tom Edman just wanted to thank you all for joining the call and a few messages to leave you with I think we are really pleased with our first quarter performance and the market conditions that are leading to anticipated second quarter performance for TTM.

We of course are in the mean time working on positioning for the second half ramp particularly in our mobile market as we build for the long-term with Viasystems acquisitions and a focus on operational execution on behalf of our customer base. So look forward to talking with you all and certainly speaking with you next quarter. Thank you..

Thank you for your participation. This does conclude today’s call..