Sameer Desai - Senior Director, Corporate Development and IR Thomas Edman - President and CEO Todd Schull - EVP and CFO.

Matt Sheerin - Stifel William Stein - SunTrust Steven Fox - Cross Research Paul Coster - J.P. Morgan Sean Hannan - Needham & Company.

Good day and welcome to the TTM Technologies Incorporated Q4 Earnings Call. At this time, I would like to turn the conference over to Sameer Desai, Senior Director of Investor Relations. Please go ahead..

Thanks, Stephanie. 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 our 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 our 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. Good afternoon and thank you for joining us for our fourth quarter and fiscal year 2017 conference call. I'll begin with a review of our business strategy, including highlights from our 2017 fiscal year, followed by a discussion of our fourth quarter results.

Todd Schull, our CFO, will follow with an overview of certain key balance sheet and cash flow metrics, our Q4 2017 financial performance and Q1 2018 guidance. We will then open the call for your questions. First and foremost I would like to thank our employees for delivering an excellent year in 2017 for TTM Technologies.

We achieved record revenues during fiscal year 2017 and closed the year with a solid fourth quarter non-GAAP EPS of $0.57, leading to an annual EPS in 2017 of $1.57. The highest level achieved in the history of the company.

We also signed a definitive agreement to acquire Anaren Incorporated in December, representing a critical step forward in our differentiation strategy. The 2017 results validated many of the elements of the TTM strategy we've communicated over the past year.

First, the diversification of our end markets helped to reduce quarterly volatility and grow total company revenues in what was a challenging year in one of our end markets. Specifically, growth in our aerospace and defense, cellular and computing end markets helped to offset the difficult conditions in the networking and communications end market.

Second, the automotive market continued to be a core growth driver, due to increasing electronics content as well as the adoption of advanced technologies.

We see four key mega trends driving automotive PCB content growth; vehicle safety and autonomous driving, increasing adoption of hybrid and electric vehicles, advanced infotainment and increased connectivity. Current forecast have recently been revised upwards to $62 in PCB content per vehicle in 2016, growing to $75 by 2020.

Some hybrid and electric vehicles currently employ well over $150 of PCBs per vehicle. We were pleased to hear that China has extended the sales tax incentive for hybrid and electric vehicle purchases, which should continue to drive growth in the China market. These types of vehicles grew by over 50% in China in 2017.

Third party markets forecast expect the automotive PCB market to grow at 5% to 8% CAGR from 2016 to 2021. In 2015 our automotive business grew by 10% and in 2016 it grew 8%. Our initial expectation in 2017 was that the automotive end market would grow within these 5% to 8% range.

However, due to rescheduled orders from customers in the electric vehicle end markets in the fourth quarter, our automotive business grew 4% in 2017.

We expect 2018 to grow at a faster rate, which will be driven by the continued ramp of new products in the electric vehicle area and new design wins at 12 high growth OEMs in the autonomous vehicle, electric vehicle and sensor areas.

In total, we've registered 30 new design wins with 14 different OEM platforms that will be ramping in the next 12 months. Finally, I would like to talk about our announced acquisition of Anaren Inc, which will increase our presence in the aerospace and defense end market and help us create more value for our customers.

First, I'll explain some of the trends in the A&D market and then discuss more about the mutual benefits of the Anaren transaction. In the commercial aerospace market, International Air Transport Association reported that global airline passenger traffic grew 7.6 % in 2017, well above the 10 year average of 5.5%.

Boeing delivered a record number of planes in 2017 and backlog is at an all-time high. Airbus saw net orders rise 52% in 2017. The trends in the commercial aerospace market are very healthy.

In the defense market, while the fiscal year 2018 Department of Defense budget has not been approved as of yet, there appears to be broad support for increased defense spending.

The fiscal year 2018 defense budget request came in at $639 billion, up 7% from the fiscal '17 enacted budget and there are expectations of further growth in the fiscal year '19 budget.

And while overall defense spending is growing in the single digit range, market forecasters expect spending on AESA radar to grow at an 18% CAGR over that same period of time. AESA stands for Active Electronically Scanned Array and represents the next generation technology for defense radars.

A number of Anaren's products are used in the AESA radar systems, which make up a meaningful portion of the expected growth for the company. The aerospace and defense end markets represented 72% of their revenue in 2017.

The remainder of their revenue 28% is in the networking communications end market, specifically wireless infrastructure for use in bay stations and microcells. Anaren designs and manufactures a number of proprietary RF components whose demand is driven by increasing data traffic as well as technology transitions such as 5G.

We expect that 5G will drive a substantial increase in Anaren's addressable market for wireless components.

In regards to how Anaren fits in with PTM, we have consistently emphasized that a key part of our strategy is to add value to the product solutions that we deliver to our customers, particularly in the aerospace and defense and automotive markets. The Anaren acquisition represents a critical step on this journey.

We have spoken to you about our integrated product solution in aerospace and defense, which includes assembled solutions and engineering services built around the PCB products. The acquisition of Anaren would add RF design, engineering and test capabilities and products to this solution.

This will enhance TTM's ability to provide build to specification products versus build to print, allowing us to engage earlier in the design process with our customers and engineers.

RF technologies represent the fundamental building block required for sensors used in aerospace and defense, automotive, networking communications and internet of things applications. To bring in more than 200 engineers with this experience enhances our growth prospects going forward.

We view Anaren's capabilities as complimentary to TTMs and are excited to combine their expertise and engineering with our strength in manufacturing. This acquisition represents our first step into an adjacent market to PCBs and will result in an improved financial profile for TTM.

We expect the acquisition to close in the first half of 2018 and quickly be accretive to TTM. We have received the HSR approval and are now awaiting CPS approval. Now, I'd like to review our end markets. The cellular phone end market accounted for 27% of revenue in the fourth quarter, compared to sales of 19% in Q4 of 2016 and 17% in Q3 of 2017.

We saw year-over-year growth of 48%, largely driven by the launch of new cellular phones. We expect cellular to represent 17% of first quarter sales due to a seasonal decline.

For full year 2017, cellular increased to 34%, as growth returned with new phone launches in the second half, which included a major technology transition for our PCB technologies in this market. In 2018 we expect the market to be in line with longer term forecast of 5% to 8% driven by additional new product launches.

Automotive sales represented 18% of total sales during the fourth quarter of 2017, compared to sales of 19% in the year ago quarter and 20% during the third quarter of 2017. The lower than expected growth was due to the rescheduled orders I described earlier.

We expect year-on-year revenue growth to return in Q1 particularly in our E-M Solutions segment and expect automotive to contribute 21% of total sales. For the full year, automotive increased 4% and reached a record high driven by increased content growth and unit volumes.

In 2018, we expect the market to be in line with longer term forecast of 5% to 8% driven primarily by content growth. Networking communications accounted for 17% of revenue during the fourth quarter of 2017. This compares to sales of 21% in the fourth quarter of 2016 and 17% in the third quarter of 2017.

Sales declined on a year-over-year basis largely due to weakness from the networking market, partially offset by relatively stronger demand in the telecom market. In Q1, we expect this segment to 18% of revenue. For the full year, networking communications declined 16% due to weakness in both networking and telecommunications end markets.

In 2018, we expect the market to be below longer term forecast of 1% to 3% growth due to softness in both the networking and telecommunications end markets. The aerospace and defense end markets represented 15% of total fourth quarter sales, compared to 14% of Q4 2016 sales and 16% of sales in Q3 2017.

On a year-over-year basis, we saw a solid growth of 14% driven by our larger defense customers. Q4 2017 A&D revenues were a record high for the company. Program backlog rose to $245 million from $220 million last quarter, which is also a record level for TTM. We expect sales in Q1 from this end market to represent about 17% of our total sales.

For the full year, aerospace and defense increased 10% and reached a record high as TTM benefited from our leading position on multiple new program ramps. In 2018, we expect growth to continue to be above market projections of 2% to 4%.

The medical industrial instrumentation end market contributed 12% of our total sales in the fourth quarter compared to 13% in the year ago quarter and 14% in the third quarter of 2017. We expect sales for this end market to represent approximately 15% of sales in the first quarter.

For the full year, MI&I grew 1% as growth in the medical and industrial areas was offset by weakness in the instrumentation segment. In 2018, we continue to expect growth to be in line with the 4% to 6% forecast, with year-on-year growth driven by business development activities with new customers.

Sales in the computing storage peripherals end market represented 10% of total sales in the fourth quarter compared to total sales of 12% in Q4 of 2016 and 14% in the third quarter of 2017. The year-on-year and sequential declines were due to an increased allocation of capacity towards the cellular market.

We expect sales in computing to represent approximately 12% of first quarter sales. For the full year, computing grew 14% as we saw a growth across our high end laptop, proprietary data center service and semiconductor customers. In 2018, we expect to be in line with expected end market growth of 0% to 2%.

Next, I'll cover some details from the fourth quarter. During the quarter, our advanced technology business which includes HDI, rigid-flex and substrate accounted for approximately 44% of our company's revenue. This compares to approximately 38% in the year ago quarter and 37% in Q3.

The year-over-year and sequential growth was driven by the cellular end market. For the full year 2017, advanced technology accounted for approximately 37% versus 33% in 2016. We are continuing to pursue new business opportunities and increase customer design engagement activities that will leverage our advanced technology capabilities in new markets.

Capacity utilization in Asia-Pacific was 92% in Q4 compared to 89% in the year ago quarter and 86% in Q3. Our overall capacity utilization in North America was 53% in Q4 compared to 53% in the year ago quarter and 55% in Q3.

Our top five customers contributed 44% of total sales in the fourth quarter of 2017 compared to 38% in the year ago quarter and 38% in the third quarter of 2017. Our top five OEM customers during the quarter in alphabetical order were Apple, Bosch, [indiscernible] and Tesla.

Our largest customer accounted for 28% of sales in the fourth quarter versus 20% in the year ago quarter and 21% in Q3. At the end of Q4, our 90 day backlog which is subject to cancellations was $481.9 million compared to $405.3 million at the end of the fourth quarter last year and $526.7 million at the end of Q3.

Our PCB book to bill ratio was 0.9 days for 3 months ending January 2. In summary, we delivered solid fourth quarter operating results following our strength in Q3.

We demonstrated the benefits of our diversified end market mix, achieved better than expected results in the cellular market, registered strong growth in our computing automotive and aerospace and defense markets and continued to see positive results from our focus on operational execution. We remain optimistic about the future of TTM.

Now, Todd will review our financial performance for the fourth quarter..

Thanks, Tom and good afternoon everyone. We had a strong fourth quarter and let me just summarize a few highlights. Revenue in the quarter of $739.3 million was a record. Revenue grew 5% year-over-year, notwithstanding that the fourth quarter of 2016 had an extra week. Adjusting for that, sales actually grew more than 9% year-over-year.

For the full year, revenue was $2.7 billion, which was also an all-time high for the company. Non-GAAP operating margin was 11.4%, exceeding expectations. For the full year, we achieved an operating margin of 9.6%, an improvement from 8.8% in 2016 and very close to our target model of 10%.

Non-GAAP EPS was $0.57 cents in the fourth quarter, above the high end of guidance, even including the negative impact of $0.04 per share or $5.2 million of unrealized non-cash foreign exchange loss, due primarily to the depreciation of the U.S. dollar versus the Chinese currency. Excluding this impact, EPS was $0.61per share.

For the full year, we earned $1.57 in EPS, an increase of 12% from $1.40 in 2016. We generated $121.7 million of adjusted EBITDA in the fourth quarter. For the full year we generated adjusted EBITDA of $389 million. Cash flow from operations in the fourth quarter was $152.7 million, an all-time record high for the company.

For the full year cash flow from operations was $332.8 million, an increase of 10% year-over-year and another record high. On to the details, for the fourth quarter, net sales were $739.3million, compared to net sales of $706.5 million in the fourth quarter of 2016 and compared to third quarter 2017 net sales of $666.8 million.

The year over year increase in revenue was due to strong growth in our cellular and aerospace and defense end markets, partially offset by lower revenue in our networking communications and computing end markets.

GAAP operating income in the fourth quarter of 2017 was $71 million, compared to $69.6 million in the fourth quarter of 2016 and $44.1 million in the third quarter of this year. On a GAAP basis, net income in the fourth quarter of 2017 was $49.2 million or $0.40 per diluted share.

This compares to a net loss of $2million or $0.02 per share in the fourth quarter of last year and net income of $21.5 million or $0.19 per diluted share in the third quarter of 2017. The remainder of my comments will focus on our non-GAAP financial performance.

Our non-GAAP performance excludes debt extinguishment cost, acquisition related costs, certain non-cash expense items and other unusual or infrequent items, as well as the associated tax impact. Additionally, we exclude non-operational changes in our tax expense such as non-cash discrete 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 third quarter was 17.9% compared to 18.9% in the fourth quarter of 2016 and 14.6% in the third quarter of 2017.

The year-over-year decrease in gross margin was due to the reclassification of certain costs from G&A into cost of goods sold that we have discussed in previous earnings calls, as well as a negative impact of strengthening Chinese currency, which impacted our operating costs.

The sequential increase was due primarily to the continued ramp of our cellular products and improving yields at our cellular focused facility. Selling and marketing expense was $16.6 million in the fourth quarter or 2.2% of net sales, essentially the same as a year ago and was $15.9 million or 2.4% of net sales in the third quarter.

Fourth quarter G&A expense was $31.6 million or 4.3% of net sales, compared to $35.8 million or 5.1% of net sales in the same quarter a year ago and $26.3 million or 3.9% of net sales in the previous quarter.

The year-over-year decrease in G&A as a percentage of sales was largely due to the reclassification certain cost from G&A into cost of goods sold. Our operating margin in the fourth quarter was 11.4%, this compares to 11.5% in the same quarter last year and 8.3% in the third quarter of 2017.

Interest expense was $10.8 million in the fourth quarter, a decrease of $1.8 million from the same quarter last year due to the re-pricing of our debt as well as prior debt repayments. We recorded $3.6 million of foreign exchange loss and other income net in the fourth quarter compared to a net gain of $9 million in the fourth quarter last year.

The loss in the fourth quarter of '17 was due primarily to the 1.9% appreciation in the Chinese R&D versus the U.S. dollar during the quarter. Our effective tax rate was 12.2% in the fourth quarter. It was 22.4% in the same quarter a year ago. For all of 2017, our effective tax rate was 14%.

Fourth quarter net income was $61.2 million or $0.57 per diluted share. This compares to fourth quarter 2016 net income of $59.8 million or $0.58 per diluted share and third quarter 2017 net income of $33.4 million or $0.32 per diluted share. Adjusted EBITDA for the fourth quarter was $121.7 million or 16.5% of net sales.

This compares with fourth quarter 2016 adjusted EBITDA of $128.5 million or 18.2% of net sales. And in the third quarter adjusted EBITDA was $85.7 million or 12.9% of net sales. The year-over-year decline was due to $13.6 million swing in non-cash, non-economic foreign exchange expense.

Moving on to our segment performance, the PCB segment had sales of $684.5 million in the fourth quarter, up from $651.2 million in the fourth quarter of 2016 and $606.2 million in the third quarter of 2017. Gross margin for this segment was 18.7% in the fourth quarter compared to 19.8% in the same quarter a year ago and 15.5% in the third quarter.

The year-over-year change in sales and gross margins were noted in my earlier comments. The PCB segments fourth quarter operating income was $102.3 million compared to $97.1 million in the same quarter last year and $70.5 million in the third quarter.

The electro mechanical solutions segment had net sales of $54.9 million in the fourth quarter, down from $55.3 million in the fourth quarter a year ago and $60.6 million in the third quarter of 2017. The year-over-year and sequential revenue decrease were due to rescheduled orders from customers in the electric vehicle end market.

Gross margin for this segment was 9.7% in the fourth quarter compared to 10.3% in the same quarter a year ago and 8.7% in the third quarter. The gross margin changes year- over-year and sequentially were mainly due to product mix.

The electro mechanical solution segments fourth quarter operating income was $2.8 million compared to $3.6 million in the same quarter last year and $2.9 million in the third quarter.

Corporate SG&A expense not directly associated with these two segments was $26.2 million in the fourth quarter of 2017, $19.8 million in the fourth quarter of 2016 and $16.6 million in the third quarter of 2017. Cash flow from operations was $152.7 million in the fourth quarter versus $97.7 million in the year ago quarter.

Our fundamental cash operating metrics, cash cycle days improved to 38 days, five days less than last year end. Cash and cash equivalents at the end of the fourth quarter totaled $409.3 million versus $301.9 million in the third quarter. For the full year 2017, cash flow from operations was $332.8 million.

Depreciation for the fourth quarter was $41.1 million. Net capital spending for the quarter was $32.2 million. Now I'd like to turn to guidance for the first quarter. We expect total revenue in the first quarter of 2018 to be in the range of $610 million to $660 million. As a reference point, our first quarter revenue last year was $625.2 million.

We expect non-GAAP earnings to be in the range of $0.22 to $0.28 per diluted share. This compares to an EPS of $0.37 per diluted share reported in last year's first quarter.

The year-over-year decline in EPS is rebated to the decrease in unit volumes of cellular, computing and networking communication products, as well as a negative foreign exchange impact from the weakening dollar against the Chinese Renminbi.

Also, please note that the guidance provided excludes any impact of the potential acquisition of Anaren and related financing costs. The EPS forecast is based on a diluted share count of approximately 108 million shares.

Our share count guidance includes dilution from dilutive security, such as options and RSUs, as well as roughly 4 million shares dilution associated with our convertible bonds, which is a function of our future stock price.

As a reminder, for every dollar increase in the average share price above $14.26 during a quarter, our shares outstanding would increase by approximately 1.5 million shares. We expect that SG&A expense will be about 7.1% of revenue in the first quarter.

We expect interest expense to total about $10.4 million and we estimate our effective tax rate to be between 13% and 15%. To assist you in developing your financial models, we offer the following additional information.

We expect to record during the first quarter, amortization of intangibles of about $6 million, stock based compensation expense of about $4.5 million, non-cash interest expense of approximately $3 million and we estimate depreciation expense will be approximately $39 million. Finally, I'd like to announce that we will be participating in the J.P.

Morgan Global High Yield & Leveraged Finance Conference in Miami on February 27. That concludes our prepared remarks. And now we'd like to open the line for questions.

Stephanie?.

Absolutely. [Operator Instructions] We'll take our first question from Matt Sheerin with Stifel. Please go ahead..

Yeah, thank you. Good afternoon..

Hello, Matt..

Hey Tom and team. So I guess just a question on the EPS and the implied margin target. It looks like you still despite - it looks you're going to have about 45% or so decrease sequentially in your cellular business, but that's still up significantly year-over-year, so I expect to see some of these year-over-year leverage there.

So I'm just trying to figure out in addition to the things talked about, why the margins would be so weak.

And as you look to the rest of the year, do you think you can - excluding Anaren obviously, that you think you can improve margins on a year-over-year basis as you get through the year?.

Let me take a crack at that Matt. So first in regards to the Q1 margins. You're correct, you observed that. We have our normal seasonal downturn in the cellular business and it's pretty significant.

As you know from a lot of public disclosure by lots of companies, the Q1 prospects in our cellular phone market are definitely softer than maybe we thought they might be a few months ago.

Now having said that, keep in mind that this cycle, this phone cycle with our biggest customer incorporates a new technology and that new technology drove a different selling price or ASP compared to maybe a much narrow range, a different range for the prior generations, last few generations of products.

So from a revenue standpoint, you still see a pretty solid number, but the units underlying that revenue are different year-over-year.

So when you look at our - then you come back to the margin equation here and you say, okay, what's happening to cause the margins to be challenged and really it's attributed - it's been driven by two main factors; one, is the utilization of our facilities particularly in the cellular and networking and communications end markets.

Our unit volumes were down and you compound that with the fact that in our cellular market particularly, we invested pretty significantly last year in adding new technology and new capacity to that facility.

We kind of have a little bit of a double whammy going, you got capacity going up and unit volume declining at this, so the gap widens from both factors. And then you add to that really a third factor that's really just become more pronounced recently and that is the - it's currency effect on our operating cost.

We've always talked about the below the line FX, which is very visible on our P&L, which we call out as kind of a non-cash, non-economic factor and that's correct. This FX that I'm referring to is actually in our cost structure.

So we have - most of our selling is done in US dollars, but we have a - in our Chinese operations, we have a significant amount of our cost that are actually local currency based. Obviously, labor cost, utility cost and those kinds of things and there's some element of our raw material purchases that are in local currency also.

So when the dollar - when the Chinese currency strengthens against that, that effectively increases the dollar value because of the change and exchange rates in our cost structure. With our selling prices being already in USD, so they're not moving in the same way to kind of mitigate that. Normally we get - we see some of that all the time, right.

Currencies move all the time and normally in modest amounts, we just deal with that as part of our everyday cost management, which we do pretty well at, but in the last - in the fourth quarter to some degree and then this quarter, Q1 year-over-year we are staring at a pretty significant percentage change.

I think it's over 4% right now in the currency between Q1 '18 and Q1 '17. So you take those factors together, that's what's really putting pressure on the margins in the first quarter.

Now, having said that, we're still expecting - if you do the reverse engineer, means the numbers I've given you and you're looking at an operating margin that's still right around 7%. So it's not like we're falling down or assorting we're going to die and go away, but it is a significant challenge that we have to manage too.

The second part of your question I think dealt with the rest of the year and I would just point out that you have to watch - if you look over our history last several years, you see a seasonal dynamics to our business and we peak in Q3 and Q4 normally and in Q1 and Q2, we always have the most challenging quarter.

Sometimes Q1is the lowest, sometimes Q2 is the lowest, they go back and forth, but they're always the two most challenging quarters. We still expect to have a pattern this year that would be pretty consistent with our long-term pattern over the last year, so we don't view this as the end of the world by any means or such an imagination..

Okay and just a couple of follow ups there. One, just on the commentary Tom, on your expectations for growth in the cellular business this year, I think low single digits. What kind of - maybe obviously visibility into that business as you mentioned, other suppliers are seeing the same thing, not much visibility.

So how do you - what kind of visibility you have or confidence that you have that you can grow that business this year?.

Right and so certainly last year, very strong growth environment in cellular phones, if you look to year-on-year, we were up about 34% and as we look at this year, we certainly had a big technology shift last year with the ramp. And again I congratulate our team.

I think they did a remarkable job of responding to that challenge and delivering financially.

As we wind - as this particular cycle winds up, I expect that next year - the cycle towards the end of the year, we'll be looking at new product introductions and we'll be looking at those product introductions based on the technology that we pulled together and ramped in this last year.

So we'll be - it will be starting - we certainly intend to be starting from a better position on yield, which will be to our advantage and beyond that if you point it out it's really a function of the end market sales.

I can't handicap that at this juncture really, but the visibility that we have on cellular phone goes through a quarter and we don't give really an indication into Q2 even until Chinese New Year - post Chinese New Year, that's sort of our next indication point. And so, you're right to point out.

We don't know what's going to happen in Q3, Q4, what I can say is, I'm thrilled about the work that we've done on the technology transition, where we are today on yields and where we are going to be starting on that next bill cycle in Q3..

Okay and just on the higher cost structure due to the currency headwinds that you're seeing, are there any plans for cost cutting or anything that you can do to help mitigate that?.

Yeah, I think so - and Todd really pointed to this. We run into cost headwinds all the time. I mean, that's a function of the business that we operate in and as you know in the Chinese environment we have a regular labor cost increases that we mitigate.

What usually takes a period of time as to respond to sudden movements in that - sudden changes in that cost structure and how we respond to that is really how we live our business, which is a focus on continuous improvement, a focus on best practice sharing, a focus on using our capability and our size frankly to continue to drive our material cost in the right direction and so we'll continue - that drum beat never ends for TTM.

So we are absolutely in the process of responding to that more and will continue to respond. And I would just remind you that a very good portion of our revenue and profitability is also North America based and not subject to that currency shift. So we've got a nice advantage there in terms of our production base..

Okay, thank you..

Thank you, Matt..

We'll move on to our next question from William Stein from SunTrust. Please go ahead..

Great. Thanks for taking my questions and congrats on a very good quarter.

I was hoping you can help us or give a brief update on the Anaren financing given the market volatility today?.

That's a good question. We've all been watching that very carefully the last week, where the market has been quite excited and we're pleased to see a little bit of stabilization over the last day and a half and hopefully that will foretell of a little more stability here as we go forward.

So as you know, we are - we announced our acquisition, we have a purchase price of 775 million. At the time of the acquisition we announced that we would expect it to go out and raise $700 in the debt market to be able to fund that transaction.

As I noted in my comments, so we've had really excellent cash flow generation through our company over the last year, almost $333 million this past year. And as a result of that you've seen our cash balance pick up here at the end of the year to over $400 million.

We will use at least an extra $100 million and so to pull the acquisition and that will basically reduce the amount we plan to go financed from 700 million down to 600 million, so that's one factor. And I think it's a very positive indicator to the market, the cash generation capability of our business model.

Secondly, assuming the market does stay stable, as Tom mentioned in his opening comments, we received one regulatory clearance, but still have another yet to obtain and that's the CPS approval.

So we won't be able to close until we get that approval and timing our financing is a - it gives us a little bit of vacant room, but we're really trying to watch the market.

We'll go to the market with probably - we've structured the underwriters to provide us with a full term loan B structure, but will consider perhaps splitting that between term loan B and high yield when we go to market depending on the market conditions at that time.

But our expectations are that with our strong cash flow generation capability and I would couple that with our proven track record of deleveraging in a fairly focused and short time period, which we've committed to do again this time and getting back to our target model of 2.0 net debt leverage.

We're pretty excited and confident that we'll be able to put a good package together and get out in paying that financing. The exact timing of when we go, is it tomorrow, is it next week, is it next month, that's all still to be determined..

Yeah and the only thing I'd would add is that from a regulatory standpoint we still continue to look at this as a first - we intend to close in the first six months of this year and that will be dependent on the regulatory process..

That's helpful, thank you. One follow up if I can, it's actually a different topic.

Automotive end market coming in a little bit later than we expected this quarter and you stated through push outs in the schedule, I'm wondering what you think fundamentally is behind that and maybe this is important you note that you saw the full year 2018 outlook as being within the normal range.

Why shouldn't we expect it to be at or above the high end given if it's really a push as opposed to a lower level of demand momentarily then shouldn't we get through better growth in the coming year? Thank you..

Sure. Yeah, so in terms of how to interpret the fourth quarter, we really - as I pointed out, it was - we had several customers in the electric vehicle area that just pushed deliveries a little bit beyond the quarter and that was primarily in our OEM solutions area.

I don't read much into that, I don't - I think the comparable quarter of the year prior, they were actually - demand was very high particularly out of China on the EV side because of some subsidy changes that were going to take effect at the end of the year. So the comparable is also little bit of a difficult one.

But as we look at this year, it's early in the year, we certainly share that view that we hope to be above the range right now.

I think it's better to look at the range, which is a very positive view on the automotive potential of 5% to 8% growth and really reflects that electronics content growth in automotive particularly in the areas that I indicated, but I would highlight, from a TTM perspective the safety management area as well as autonomous vehicle growth is - we take advantage of our footprint, our geographic footprint in North America combined with volume production capabilities in China to support our customers there, as well as our RF experience and now I think certainly intend to build on that here as we close the Anaren acquisition..

Great, thanks. And good luck in the year..

Thank you..

We'll take our next question from Steven Fox from Cross Research. Please go ahead..

Thank you, good afternoon. I guess first off, thanks for all the color on sort of what's going on year-over-year in Q1 with the profound next generation technology.

Can you talk about how that ramps though in Q4, in other words did you meet your yield targets, was it staggered, did you see better operating leverage or is there any other cost that you had absorbed that were unexpected in Q4, a little bit more color on how that ramp went for you with that obviously relative your own performance, perhaps related to what your customers needed?.

Sure and we had some indication of this exiting Q3. If you remember, we were ahead of our internal forecast on yield performance in Q3 that was really - we were excited to see that. So we had momentum that we're carrying into Q4. The team continued to improve yields through the course of Q4 ahead of our expectations.

We certainly - even in Q1 we're expecting that those yields will continue to improve, given that is - the extent it really is, a major change to move to a subsidy like processing technology and so we expect that to continue. I think in overall Q4 in that area really exceeded our expectations on yields, tremendous job by the organization..

Great, that's helpful. And then in terms of the auto business, you mentioned I think it was 30 new programs that are ramping over the next 12 months.

Can you give us a little bit of a sense for what those 30 are by sort of end application within the customer?.

Yeah, so a mix that those programs are a mix, they're predominantly - as you can expect, they're predominantly in the advance technology area and RF.

There are a few conventional board ramp programs still ramping, but primarily you're going to see that advance technology in the RF area and so we're seeing a lot of activity - ongoing activity, particularly in sensors and electric vehicle, that area as we see growth.

And again it's a function of one thing being TTMs focused technology areas, the other being our ability to support geographically the early stage development work at our customers and the way that we do that in the US is mainly through our PCB facilities, most of which are in proximity.

We've got a nice footprint commercially with facilities and proximities in the Silicon Valley coupled with medium volume facilities that are in other areas of the US and then the support structure in China for ramp. That gives a lot of security to those customers.

And then in Chine, we're mainly supporting these programs with our E-M solutions organization in China. Again same view, but there we're really working on assembled solutions and engaging with the customers of the assembled solutions that then drag the PCB sales along with them. So that's through the manner of engagement..

Great, thank you. And then just lastly on the cash flows which were fantastic in the quarter and the year. You're painting a picture for top line growth in 2018. I assume that that should lead to some profit growth.

Does it also lead to cash flow from operations going higher or is there something going on in terms of working capital that maybe would be a drag as you think about the full the year 2018? Thank you..

I'll take that Steve. In regards to our working capital exercise, I identify cash cycle base as kind of our key metrics that we look at in terms of managing our working capital.

We have a very vigorous program that we work internally on trying to push all the different buttons or pull the levers to gear therefore that influence that metric because it's important to us. And we estimate that a day's worth - one day of cash cycle time is $8 million of cash, so we're motivated to try to improve that.

Now, is there a lot of run way to take another five or ten days off that becomes very challenging, but I don't expect deterioration on a year-over-year basis.

You will see some seasonality, but if you compare our cash cycle days over the last eight quarters for example, you'll see that each year Q1 over Q1, Q2 over Q2, you'll see improvement and we would hope to continue that path, but that's a very, very challenging and difficult thing to do.

But I don't expect any serious deterioration, so therefore cash flow from operations should parallel what we should see in terms of revenue and profit growth in the business..

Great, that's very helpful. Thanks again..

Thank you..

We'll move on to our next caller, Paul Coster with J.P. Morgan. Please go ahead..

Thank you for taking my question. I have a few quick questions, so thanks for this full year. It looks pretty impressive, the first quarter.

Should we expect the same through the remainder of the year?.

So yeah, our guidance, the way we're looking at 2018 is that that range of 13% to 17%. So that's our projection for the full year and then you kind of tweak it as you go forward and you get more actual results..

The acquired business Anaren had operational margins that more than doubled the legacy business, so - I mean it seems reasonable to assume that operation margins are going to expand in the second half of the year once the acquisition is out of the way.

Do you think the combined business will top the target range and it will have superior advise in consecutive to the Anaren integration?.

One big variable in that is timing and as Tom mentioned, we're not sure when we're going to close, but we'll certainly try to provide a better sense of what the outlook might look like when we to get that closing date.

You're right to observe that their business model generates operating margins that are twice what we normally see on the average and their EBITDA margin is mid 20s and we're kind of mid teens, so there is a significant upside into the financial model.

We also expect assuming the debt markets willing, that if the - that if our financing comes in at a reasonable price if you will, that this transaction is going to be accretive very quickly if not either like in the first or second quarter after we close the transaction.

And we have some synergies baked and what not, so definitely see positive contribution from the acquisition. Then you obviously would layer that on your expectations for our base business which as I indicated earlier, we've given some guidance on where we think revenue is going to look like for there, Tom's given some color on that.

And as far as the profit forecasting ability, I would encourage you to make sure you look at our typical seasonal patterns. If you look over the last several years and see how our profits generally grow as revenues grows and our ability, you know what our leverage points are.

We've talked often about incremental revenues drive 20% to 30% profit flow through on the PCB business. So using those metrics and your knowledge of kind of how we act over the last several years, you would have to kind of build that. I can't comment specifically to estimates that are out in the street at this point..

Last question on CPS, you've got large China based operation, but you're a US based company and US list; essentially you also got some Asia based share ownership.

What kind of risks are you running here and other contingents you plan to have in place and how comfortable that you can get through the situation there?.

So a couple of points there, so TTM is acted under a special security agreement with the US government, to a degree with the defense department since the lethal [ph] acquisition, so going on seven years now. And so there is an ongoing relationship there. There is an agreement which can be amended as needed.

We take those - the requirements of that agreement very seriously and have an excellent working relationship there with the government and so slice to say that we certainly have been through the process twice so far, this is our third road here if you will and we understand the process.

We have to have an existing relationship, so we have all - I'll view that we will - that is fairly optimistic about how this will come together, but there is a time table and a clock that goes with the review and we have to work through the government's time table on this.

So we'll certainly keep you informed here and again either Q1 or Q2, it is our intent to close the transaction..

Okay, thank you very much..

Thank you..

And we'll move on to Sean Hannan with Needham & Company. Please go ahead..

Yeah, thanks for taking my question here.

It's just a question going back to automotive, when you talk about the 30 wins that you took on here and that you're expecting to ramp during the course of '18, just for reference, how many did you ramp in '17, number one and then number two, what would the timing look like for that as that proceeds there this year? Thanks..

Yeah, Sean, so we haven't disclosed the number last year and this is really something that we will be doing for you going forward.

In terms of when those ramps would occur there, yeah, the ramps that will be occurring in the next year and starting with relatively small volumes and then building and as you know the process here is that these programs tend to take two years to build to meaningful volume, but we're in early - at early stage volume at this point and building in the course of the next year or two commercial volumes.

So you're looking at - really starting this year and then building into a more meaningful volume into 2019, 2020..

Okay, understood.

And then to follow up on some comments that were provided different segment, looking at networking and communications, so you're expecting growth to be below the typical than norm for that space this year, just trying to understand how you expect maybe the shape of that to look? Is this something where perhaps we should think about, from current point going into the middle of the year, an incremental slow down or until then maybe where we sort of uptick a little bit at the end of the year, how do we think about that general path for that segment? Thanks so much, folks..

So the networking piece of this and about of two thirds of what we call networking and communications is really on the networking space and a third is on the telecom side. The networking side is always difficult - it's difficult to give visibility there in terms of - I think what we're seeing right now is an overall slowdown in the enterprise spend.

I would expect that to gradually come back during the course of the year, but outside of that we deal with a very large set of networking customers and all of these are different dynamics and that causes it to be a little bit difficult to forecast.

So for us forecasting a relatively flat is probably the right way to look at it through the course of the year.

And then telecom would see as right now sort of bouncing along the bottom and as 5G, the initial build outs start to happen towards the end of this year and then into the next year, that's when we would expect volume to develop on the telecom side.

So that's what where I think your point is, a good one that we would start to see some volume build in the Q3 timeframe and then really start seeing higher volumes as we go into next year and then into 2020..

Okay, very helpful. Thanks for taking the questions here today folks..

Thank you..

And there are no further questions in the queue. I'd now like to turn the call back over to Mr. Tom Edman for any closing remarks..

Okay, thank you Stephanie and good commitment. And I'd like to just close by summarizing the points made earlier. First, we delivered really strong results for the fourth quarter of 2017. You heard the number of records that we recorded both for the fourth quarter and for the full year.

So I'd like to just reiterate my congratulations to our team on just a terrific quarter.

We did beat the high end of our non-GAAP EPS forecast as well as content that really was due to that solid growth and very strong operational execution and just capped off an outstanding year where we reached record revenues, non-GAAP earnings per share and operating cash flow.

We are excited about closing the Anaren transaction and being able to welcome a new set of employees and terrific engineering capability into TTM and I look forward to those potential mutual benefits. And finally, I just like to close by thanking all of you our investors, our employees and all those customers who're on the phone.

Thank you for your continued support. Good bye..

And this concludes today's call. Thank you so much for your participation. You may now disconnect..