Sameer Desai - Senior Director, Corporate Development and IR Thomas Edman - President and Chief Executive Officer Todd Schull - Executive Vice President and Chief Financial Officer.

Matthew Sheerin - Stifel, Nicolaus & Co., Inc. William Stein - SunTrust Robinson Humphrey Steven Fox - Cross Research LLC Paul Coster - JPMorgan Woo Jin Ho - Bloomberg Intelligence.

Good day, and welcome to the TTM Technologies Inc., Q1 Earnings Call. At this time, I would like to turn the call over to Sameer Desai, Senior Director of Corporate Development and Investor Relations. Please go ahead, sir..

Thank you. Before we get started, I would like to remind everyone that today's call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to TTM's future business outlook.

Actual results could differ materially from these forward-looking statements due to one or more risks and uncertainties including 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 measures prepared and presented in accordance with GAAP and we direct you to the reconciliation of non-GAAP and 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 first quarter 2018 conference call. I'll begin with a review of our business strategy, including highlights from the quarter, followed by a discussion of our first quarter results.

Todd Schull, our CFO, will follow with an overview of certain key balance sheet and cash flow metrics, our Q1 2018 financial performance and Q2 2018 guidance. We will then open the call for your questions. First and foremost, I would like to welcome the employees from Anaren, who joined TTM two weeks ago.

In fact, we are in Syracuse today for this call. We are very excited to have all of you on Board and to be able to move forward together in building on TTM’s strong operational foundation with your tremendous depths and expertise in RF engineering.

Together, we will provide a more comprehensive and value-added solution to our aerospace and defense and commercial customer base. I would also like to thank all of our employees for their achievements in the first quarter of 2018 for TTM.

We achieved the highest revenues for our first quarter in the history of the company, and non-GAAP EPS within our guidance, despite some challenging seasonal trends. We continue on our journey towards diversification of our end markets and differentiation of our capabilities.

The last several months have validated many of the elements of this strategy, which we have communicated over the past two years. First, the diversification of our end markets help to reduce quarterly volatility and grow total company revenues in what was a challenging quarter in two of our end markets.

Specifically growth in our aerospace and defense and automotive end markets help to offset the difficult conditions in the networking communications and computing end markets. Second, we continue on our path towards differentiation in the automotive and aerospace and defense end market.

The automotive end market continues 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.

First, vehicle safety and autonomous driving; second, increasing adoption of hybrid and electric vehicles; third, advanced infotainment; and fourth, increased connectivity. Estimates of $62 in PCB content per vehicle in 2016 are expected to grow to $75 by 2020. Some hybrid and electric vehicles currently employ well over $150 of PCBs per vehicle.

Despite some concerns over autonomous driving, we continue to see significant design activity in both the sensor area as well as artificial intelligence processors. In addition, we are also seeing early design work in vehicle-to-vehicle communications, including 5G.

These technologies will use much more sophisticated semiconductor, RF and radar technology driving increasingly complex PCBs, which is an inherent facet of our differentiation strategy. In the automotive market, customer engagement begins well before product ramp.

The growth we expect in 2018 as being driven by design wins in 2017 with both larger, more established automotive suppliers and OEMs as well as smaller, newer high growth companies. In 2018, we expect product ramps with 12 of these high growth OEMs in the autonomous vehicle, electric vehicle and sensor areas.

Combined with more established automotive customers, we registered more than 30 new design wins with 14 different OEM platforms in 2017 that will be ramping in 2018. Additionally, in the first quarter of 2018, we have won six new major design platforms for three of our current customers, which will be ramping in 2019 and 2020.

Two of the wins were large next generation radar programs, which brings our total active production radar customers to 12. We expect increasing adoption of advanced technologies to drive growth in 2018 and beyond. The Anaren acquisition represents another critical step in our differentiation strategy.

Anaren will increase our presence in the aerospace and defense end market and greatly enhance our focus on the high growth radar and satellite portions of the market. A number of Anaren’s products are used in AESA radio radar systems, which are expected to grow at an 18% CAGR.

AESA stands for active electronically scanned array and represents the next generation technology for defense radars. The aerospace and defense end market represented 72% of Anaren’s revenue in 2017.

The remainder of Anaren’s revenue 28% is in the networking communications end market, specifically wireless infrastructure for use in base stations and micro cells. 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 TTM.

We have consistently emphasized that a key part of our strategy is to add value and differentiate the product solutions that we deliver to our customers, particularly in the aerospace and defense and automotive market. 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 PCB products. The acquisition of Anaren adds RF design, engineering and test capabilities and products to the solution.

This will enhance TTM's ability to provide build to specification products versus built to print allowing us to engage earlier in the design process with our customers. 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. The process of integrating Anaren into TTM is proceeding on track. For the first several months Anaren while operate as a separate business unit under TTM.

Our ultimate plan is to integrate Anaren’s commercial and aerospace and defense businesses and TTM’s existing commercial and aerospace and defense sectors.

I am thrilled to report that Larry Sallah, former CEO of Anaren will remain with TTM, reporting to me as he leads to the Anaren business units through this transition and subsequently will assist with ongoing business integration and strategy execution.

Over the past four months I have met with the number of our critical customers and with Anaren employees. The reaction from both constituencies has been positive. Our internal employee teams are communicating very well with one and another and are now able to share best practices across all of our businesses.

Our message to employees and customers from day one of this acquisition has been to remain focused on execution on behalf of our customers. This has allowed us to really emphasize our expanded capabilities to our customers and to explore new opportunities with them. The major goal of this acquisition is to add to TTM’s revenue growth.

The addition of Anaren moves TTM higher up in the value chain, allowing us to engage with customers earlier in the design cycle. Our customers can now rely on TTM to deliver a completely designed RF solution to meet their needs.

And additional aspect of the integration will be to realize the $15 million in annualized run rate cost synergies within two years of the closing of the acquisition, as we have previously outlined to our shareholders. We have already identified many of these opportunities and have firm plans in place to execute on them over the two-year time line.

We see compelling value creation in this transaction with Anaren expect it to be immediately accretive to non-GAAP operating margins, adjusted EBITDA margins, non-GAAP EPS, and free cash flow. Now I'd like to review our end markets.

Automotive sales represented 20% of total sales during the first quarter of 2018 compared to sales of 20% in the year ago quarter and 18% during the fourth quarter of 2017. We expect year-on-year revenue growth to accelerate in Q2, particularly in our E-M Solutions segment and expect automotive to contribute 21% of total sales.

In the defense market, we were encouraged to see that a two-year budget deal was signed funding the Department of Defense with $700 billion in 2018 and $716 billion in 2019, which represents 20% growth over the two year period. Two significant areas for TTM, Missiles & Munitions and Radar Systems are expected to grow the fastest.

For TTM the aerospace and defense end market represented 18% of total first quarter sales compared to 15% of Q1 2017 sales and 15% of sales in Q4 2017. On a year-over-year basis, we saw strong growth of 23% driven by our larger defense customers. Q1 2018 our A&D revenues were record high for the Company.

Program backlog rose to $269 million from $245 million last quarter, which is also a record level for TTM. Including Anaren, total – program backlog at the end of Q1 would have been $427 million. We expect sales in Q2 from this end market to represent about 22% of our total sales.

This includes approximately three point from the additional Anaren revenues. Networking communications accounted for 16% of revenue during the first quarter of 2018. This compares to sales of 20% in the first quarter of 2017 and 17% in the fourth 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 Q2 we expect this segment to be 19% of revenue and we expect to see initial revenues for 5G related applications.

The cellular phone end market accounted for 15% of revenue in the first quarter compared to sales of 14% in Q1 of 2017 and 27% in Q4 of 2017. We saw year-over-year growth of 17% largely driven by higher ASPs. We expect cellular to represent 9% of second quarter sales as inventory levels are reduced prior to new model launches in the second half.

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

Sales in the computing storage peripherals end market represented 12% of total sales in the first quarter, compared to total sales of 15% in Q1 of 2017, and 10% in the fourth quarter of 2017.

We expect sales in this end market to represent approximately 14% of second quarter sales as we can see continued growth in high end data centers that include machine leanings and artificial intelligence capabilities as well as new product rollouts in high end laptops. Next, I'll cover some details from the first quarter.

During the quarter, our advanced technology business which includes HDI, rigid-flex and substrate accounted for approximately 34% of our Company's revenue. This compares to approximately 35% in the year-ago quarter, and 44% in Q4. The sequential decline was driven by the cellular end market.

We are continuing to pursue new business opportunities and increased customer design engagement activities that will leverage our advanced technology capabilities in new markets. Capacity utilization in Asia-Pacific was 78% in Q1 compared to 81% in the year-ago quarter and 92% in Q4.

Our overall capacity utilization in North America was 61% in Q1 compared to 57% in the year-ago quarter and 53% in Q4. As growth in our A&D and computing end markets drove additional production in North America.

Our top five customers contributed 32% of total sales in the first quarter of 2018 compared to 34% in the year-ago quarter and 44% in the fourth quarter of 2017. Our top five OEM customers during the quarter in alphabetical order were Apple, Bosch, Google, Huawei, and Tesla.

Our largest customer accounted for 16% of sales in the first quarter versus 16% in the year-ago quarter and 28% in Q4. At the end of Q1, our 90-day backlog which is subject to cancellations was $479.6 million compared to $414.4 million at the end of the first quarter last year and $481.9 million at the end of Q4.

Our PCB book-to-bill ratio was 1.01 for three months ending April 2.

In summary, during the first quarter we demonstrated the benefits of our diversified end market mix, achieved better than expected results in the aerospace and defense market, manage the seasonality in our consumer oriented markets, and continue 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 first quarter..

Thanks Tom, and good afternoon, everyone. We knew going into the first quarter that we would face some challenges, but in the end we executed well and delivered on our commitment. Revenue in the quarter of $663.6 million grew 6.1% year-over-year. Non-GAAP operating margin was 6.7% and non-GAAP EPS was $0.26 above the midpoint of our guidance.

In the first quarter, we adopted the new revenue recognition standard ASC 606, which requires us to recognize revenue as we build the product, essentially, within finished goods inventory become revenue.

The adoption of this new standard added $14.1 million to our revenue results in the first quarter and $2.1 million of pretax profit or $0.017 of EPS. In future quarters, the impact of this new standard could be either positive or negative depending on whether we are increasing inventories or reducing them in a given quarter.

From an end market perspective, we bucket these revenues in the other category. So on to the details. For the first quarter, net sales were $663.6 million compared to net sales of $625.2 million in the first quarter of 2017 and compared to fourth quarter net sales of $739.3 million.

The year-over-year increase in revenue was due to growth in our aerospace and defense, cellular and automotive end markets and the impact of the new revenue recognition standard, partially offset by lower revenue in our networking communications and computing end markets.

GAAP operating income for the first quarter of 2018 was $30 million, compared to $52.6 million in the first quarter of last year and $71 million in the fourth quarter. On a GAAP basis, net income in the first quarter of 2018 was $10.1 million or $0.09 per diluted share.

This compares to $33 million or $0.28 per diluted share in the first quarter of last year and net income of $49.2 million or $0.40 per diluted share in the fourth quarter of 2017. The remainder of my comments will focus on our non-GAAP financial performance.

Our non-GAAP performance excludes acquisition related costs, certain non-cash expense items 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 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 first quarter was 13.4%, compared to 16.9% in the first quarter of 2017 and 17.9% in the fourth quarter.

The year-over-year decrease in gross margin was due to lower volumes versus last year of cellular computing and network products, strengthening RMB, which is the Chinese currency, which negatively impacted our operating costs and the absence of a $3 million insurance settlement, which we received last year in Q1.

The sequential decline was due to seasonally lower volumes in our advance technology facilities. Selling and marketing expenses was $17.3 million in the first quarter or 2.6% of net sales versus $16.4 million and 2.6% of net sales a year-ago and $16.6 million or 2.2% of net sales in the fourth quarter.

First quarter G&A expense was $27.4 million or 4.1% of net sales compared to $27.7 million or 4.4% of net sales in the same quarter a year-ago and $31.6 million or 4.3% of net sales in the previous quarter. Our operating margin in Q1 was 6.7%. This compares to 9.8% in the same quarter last year and 11.4% in the fourth quarter.

Interest expense was $10.5 million in the first quarter, a decrease of $0.5 million from the same quarter last year due to the repricing of our debt as well as prior debt repayments. During the quarter, we recorded $3.4 million of foreign exchange loss. This was partially offset by government incentives for a net expense of $1.1 million.

This compares to a net loss of $1.7 million in Q1 last year. The foreign exchange loss in Q1 2018 was due primarily to the 3.4% in the Chinese RMB versus the U.S. dollar during the quarter. Our effective tax rate was 15% in the quarter, it was 19% in the same quarter a year-ago. First quarter net income was $28 million or $0.26 per diluted share.

This compares to first quarter 2017 net income of $39.2 million or $0.37 per diluted share and fourth quarter 2017 net income of $61.2 million or $0.57 per diluted share. Adjusted EBITDA for the first quarter was $83.2 million or 12.5% of net sales, compared with first quarter 2017 adjusted EBITDA of $95.6 million or 15.3% of net sales.

In the fourth quarter, adjusted EBITDA was $121.7 million or 16.5% of net sales. Moving on to our segment performance, the PCB segment had net sales of $616.4 million in the first quarter up from $583.6 million in the first quarter of 2017 and down from $684.5 million in the fourth quarter of 2017.

Gross margin for this segment was 14.3% in the first quarter compared to 18.2% in the same quarter a year ago and 18.7% in the fourth quarter. The year-over-year change in sales and gross margins were noted in my earlier comments.

The PCB segments first quarter operating income was $64.2 million compared to $82.2 million in the same quarter last year and $102.3 million in the fourth quarter.

The Electro-mechanical Solutions segment had net sales of $47.2 million in the first quarter, up from $41.7 million in the first quarter of last year, but down from $54.9 million in the fourth quarter. The year-over-year increase was due to stronger volumes in our automotive end market.

Gross margin for this segment was 5.5% in the first quarter compared to 2.7% in the same quarter a year-ago and 9.7% in the fourth quarter. The gross margin year-over-year improvement was due to the absence of special inventory reserves incurred last year. The sequential gross margin decline was due to lower volumes.

The Electro-mechanical Solutions segments first quarter operating income was $40,000 compared to a loss of $1.4 million in the same quarter last year and a profit of $2.8 million in the fourth quarter.

Corporate SG&A expense not directly associated with either of these segments was $18.3 million in the first quarter of 2018, $17.8 million in the first quarter last year and $19.8 million in the fourth quarter. Cash flow from operations with the use of $14.3 million in the first quarter versus a source of $49.6 million in the year-ago quarter.

The decline in cash flow in the quarter was due to increased working capital levels. As mentioned in previous calls, our cash flow can be choppy quarter-to-quarter. The combination of the seasonal slowdown in certain of our end markets coupled with the timing of significant customer payments resulted in the increase in Q1.

Our fundamentals however remain under good control and over the annual cycle we expect to generate strong cash flow. Cash and cash equivalents at the end of the first quarter totaled $352.6 million versus $409.3 million in the fourth quarter. Depreciation for the first quarter was $39.8 million and net capital spending was $42.1 million.

Now I'd like to turn to guidance for the second quarter. We expect total revenue for the second quarter of 2018 to be in the range of $700 million to $750 million, which includes $55 million of revenues from Anaren for the partial period of approximately 10 weeks.

This revenue guidance also includes approximately $11 million from the new revenue recognition standard. As a reference point, our second quarter revenue last year was $627 million.

We expect non-GAAP earnings to be in the range of $0.34 to $0.40 per diluted share, which includes a positive $0.05 contribution from Anaren and a negative $0.02 headwind from the new revenue recognition standard. This compares to an EPS of $0.31 per diluted share reported in the second quarter of last year.

In terms of modeling Anaren for the rest of the year, we suggest growing revenues at a high single-digit growth rate year-on-year with aerospace and defense growing faster than the communications end market. Operating margins should be modeled in the low-20’s before synergies.

And we are targeting annualized run rate synergies of $15 million by the end of two years from closing with a linear ramp starting in our third quarter. The EBS forecast is based on the diluted share count of approximately 107.5 million shares.

Our share count guidance includes dilution from dilutive security, such as options and RSUs, as well as roughly 2 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 around 7% of revenue in the second quarter.

We expect interest expense to total about $16.2 million, which reflects the additional term loan associated with the acquisition of Anaren. Finally, we estimate our effective tax rate to be between 13% and 17%. To assist you in developing your financial models, we offer the following additional information.

We expect to record during the second quarter, amortization of intangibles of about $6 million, stock-based compensation expense of about $6 million, non-cash interest expense of approximately $3.4 million and we estimate depreciation expense will be approximately $41 million.

The amortization of intangibles does not yet factor in the recent Anaren acquisition, which is pending completion of our purchase accounting process. Finally, I'd like to announce that we’d be participating in the JPMorgan Technology, Media and Communications Conference in Boston on May 17.

The Stifel Cross Sector Insight Conference in Boston on June 12, and the Barclays High Yield Bond & Syndicated Loan Conference in Colorado Springs on May 22. We will also be hosting an Analyst and Investor Day in New York City on May 24. That concludes our prepared remarks. And now we'd like to open the line for questions.

Stephanie?.

[Operator Instructions] And we will take our first question from Matt Sheerin with Stifel. Please go ahead..

Yes. Thank you and hello everyone. Just a question regarding your mobile – your cellular business which was down, I think greater than you had expected in the March quarter, which is no surprise, and then you're guiding down significantly, it looks like you're going to be down around 14% revenue year-over-year in that sector.

In the past time you've given outlook for the year for different sectors and your outlook at the beginning of the year, I think was in the mid single-digit growth range, and obviously you're starting out a much lower base here.

So what is your outlook that you can - the visibility that you have in Q3 and Q4 in your relationship with that big customer..

Sure, Matt. So one thing in terms of just keeping in mind, with the ASP's the revenue itself if you look – so Q1 to Q1 actually we grew on the cellular phone side, you're right on the Q2 to Q2 compare will be down.

But if you look at that and then you think about the overall market forecast of 5% to 8% that's not all of it that difficult of a hill to climb given the ASP move between the first half of this year and the first half of last year.

And remember that in Q3 last year, we experienced a late start up particularly on the cellular side, and so that that impacted our revenues in the third quarter. So as we look at the full-year, we're still comfortable that we'll be able to move into that range of 5% to 8%, provided we hit the ramp schedules as expected.

And certainly at this point we’re in that the prototyping sort of the normal pace in terms of prototyping stage that you would expect to see..

Okay.

And last year as you just pointed out, the seasonality of that business was different than you typically see, do you getting a sense that there's a more normal seasonality in that business this year versus last year? Or was it hard to tell?.

Well, I think if you look at last year with a significant technology shift, and of course on the printed circuit board side and with other in other areas as well. The extent of the technologies shift at least on the PCB side that we would expect to see this year would be left.

That would certainly lead you to look at the PCB ramp schedules being one that would be more typical in terms of ramp cycles. Of course, we're not in control or have any influence on the rest of what goes in a phone, so I'm saying that was great.

But that, certainly, from what we're seeing and on the PCB side a more normal technology shift as we look at this years cycle..

Okay. Thank you. That's helpful. And then regarding Anaren, you talked about the contribution in the aerospace and defense area, which is significant. And then with your guidance on the network communications in the June quarter, I think you're looking for significant growth.

Is that – how much of that comes from Anaren in terms of the sequential growth in that network communications? Or is this – the base business is going to be flat up slightly, and the rest will be Anaren to get to that number that you have, the percentage?.

Yes. That's a good way to think about it..

I know your network comm business has been declining. It looks like seven quarters in a row year-over-year.

And so question one is, Anaren growing that business and are they in different parts of the business if they are? And second, when do you expect to kind of turn the corner on this business, which has obviously been a drag on topline? I know there's 5G.

What's your outlook there Tom?.

Sure. And yes, the Anaren business very different from the standpoint of supplying RF components that are then used in the base station, but also the microcell. And so as you're building on top of the infrastructure, essentially they would continue to see business.

From a PC board standpoint, the PCB business is oriented around that that base station rollout, and so really you see that growth as the infrastructure is laid out globally. So as you remember we had a very nice spike in demand and networking communications back with 4G, as 4G rolled out.

And at that point at the peak of that 4G rollout, the telecom portion of our networking communications space, it really grew to about 50%, now we're back down, have been back down to less than a third of networking communications being that that base station related demand.

So from a PCB standpoint, we would expect to see a similar kind of cycle with 5G. From a Anaren benefit standpoint, you would see again that that initial spike certainly with base stations rolling out, but then on top of that an ongoing strong business profile with microcells..

Okay, thanks very much..

Our next question will come from William Stein with SunTrust. Please go ahead..

Great, thanks for taking my question. In automotive, I think we're well aware that the predictability or the let's say the pipeline of visibility, [indiscernible] a very strong, you can design wins early there.

But we noted that recently there was news of fire factory of a competitor and I'm wondering from a share perspective does that provide an opportunity and are we seeing that in either the near or further term outlook?.

Sure, thanks Will. Yes, I'd say – so the fire that occurred for those who haven't heard was at a Chin Poon facility in Taiwan and Chin Poon is really is the leader in automotive. TTM at least as far as market forecasters are concerned come is the second in position there.

The facility affected was in Taiwan, not their largest facility, which would be in China. And I’d really like to say first and foremost this was just a real tragedy and our sympathies go out to the first line responders, who lost their lives in that incident as well as I understand there were two contract employees who were affected.

And that more than anything employee just really makes you concerned and heightens are attention to safety in our facilities and – but beyond that in terms of customer support certainly where we're determined to support our customers as they go through, as they experience the after effects of this.

From a TTM, overall effect we're running very pretty much full out and our major automotive facility in China. So well, we're going to go all out to support customers. I think it's a rather immaterial effect in terms of our prospects and it's reflected in that second quarter forecast that we gave you..

Appreciate that thoughtful answer. Maybe one other any – you’ve already giving us some good details about Anaren and how we should expect it to progress through the year. Any early lessons or let’s say surprises that it might have – that you might have seen in Anaren business as you have closed it relatively recently? Thank you..

Sure. I would say that more than anything else is just been reinforcing our excitement about the business, about the prospects. I think the – if anything – the customer reaction certainly on the aerospace and defense side has been gratifying, I think for all of us.

I think the assurance that Anaren had found a good home for the long-term business and then the synergy, the revenue synergy opportunity in terms of the combination of just fantastic RF engineering capability with TTM’s breadth of technologies on the PCB side has again excited to our customers and also our employees.

So we're planning now for the integration. For us it's really – the key is prioritizing opportunities, making sure that we grow properly with those opportunities and that we take care of our customers, and that's where our attention is focused at this point.

But really tremendously exciting for us and we're happy to be here in Syracuse today making this call..

Thanks and congrats on the good results and outlook..

Thank you..

[Operator Instructions] And we will move next to Steven Fox with Cross Research. Please go ahead..

Good afternoon. Couple questions for me. First of all, when you think about all the auto opportunity that you mentioned that's ramping just this year, can you give us a sense, I know it's a little early, but a sense for what you think that mean for second half auto versus first half auto sales for the company? And then I had a follow-up..

So generally we're looking still at a year-on-year growth level of that in the market forecaster range between 5% and 8%. Obviously, we're looking at – it looks like a good strong second quarter which is tremendous.

And we will certainly update this as we get through the second quarter, but at this point overall comfortable with the 5% to 8% growth rate, we're very – again excited about the RF area and ongoing development going on at our customers, and our ability to provide the right kind of support for those customers.

During the course of this year most of that from a commercial standpoint will impact volume next year and the year after, but even the work that we've done in the last couple years is now paying off and contributing to that 5% to 8% growth rate..

Great. Thank you. And then in terms of just thinking about the technology mix, like you mentioned you get ASP benefit year-over-year.

How does that play out as you anticipate your mix into the rest of the year? Does ASP year-over-year benefit sort of dissipate because these products become more standard and if so by can you give us a sense for any other color around that?.

Sure. So the ASP reference was specific to cellular and really was a result of that large technology change as we move to what's called a substrate like PCB processing capability. And that was really driven by the need to get the finer lines and spacing are more dense circuitry in cellular phone.

So that major move in technology which occurred last year, of course, resulted in an ASP move. Well we would see and as I’d mentioned earlier, this year less of a technology move therefore less of an ASP move.

And so if you start thinking about ASP’s third quarter and fourth quarter to last year's third and fourth quarter that would be a much less pronounced difference in ASP.

Of course earlier in the cycle, you get the benefit, they are usually versus late in the cycle, so versus second quarter into third quarter, so the previous cycle to the news cycle there will generally be a move up in ASP's, but given the fact the technology is not changing significantly, you'll see a rather – that will be a smaller move.

And then during the course of the ramp, you would see that that ASP, a regular sort of reduction in ASPs during the course of that ramp. So hopefully that gives you a feel for what we're seeing..

Yes, it does. Thank you..

Thank you..

Our next question will come from Paul Coster with JPMorgan. Please go ahead..

Yes, just a couple of quick ones. First of all, you put in place some dedicated capacity for a major cell phone customer and the utilization rate fell as our products and went through cycle.

Have you found additional customers for that capacity and how should we think about that in terms of its impacts on margins over the course of the year?.

Yes, so as there has been additional work done on this technology, I think you've probably seen. There been some announcements. I think both that from an IP standpoint out of Korea as well as out of China adoption I expect will be occurring through the course of this year and then into next year.

And from a TTM standpoint, again I think – where we look at when we hit that third quarter and fourth quarter, really we’re in full ramp and so the effect that or any effect that you would see would be more on the tail end of the ramp and Q1, Q2 next year.

So relatively small and for the next certainly through this year cycle and then we will hope to see the benefit of that spreading of technology as we move forward over the next several years..

We have the figures that we’re seeing the EMS space in evidence of the supply chain buying long lead time inventory and investing ahead of some of the customer ramps. I'm not quite sure what to make of your balance sheet at the moment, just sort of looking at first time.

But is there anything we should know regarding the way in which inventory is evolving, heading into what was particularly with on boarding Anaren and heading into the second half of this year?.

Yes, just Paul I didn’t want to cover off and so the second part of your first question which also to finish up on the technology because what you're seeing here is driven by circuit density that is a drive that we see beyond cellular phone.

So I would expect that you'll start to see that technology move into other areas such as computing and automotive here as additional all reliability data is gathered, so certainly a technology that has legs in terms of the breadth of application for it. With that, let me turn it over to Todd for that answer on inventory..

So when you look at our balance sheet right now, it looks very strange I think. You see inventory looks like its way down year-over-year and then we have this new asset that's called contract revenue or something like that, which is really this new revenue standards kicking in.

And so what used to be within finished goods inventory is now in this accrued revenue if you will asset and it really muddies – it makes it harder for you folks to be able to see or to discern what's happening at the underlying inventory levels.

What I can tell you on a more apples-to-apples basis is that inventory is relatively unchanged absent this revenue recognition change rule or rule change.

When you look at our cash flow and some of my comments around cash flow really the bigger issue there was in our inventory, it was our receivables, which is really more a function of the timing of customer payments and whatnot. That's really what we saw the challenging Q1 versus Q4 for example. But inventory levels in general are not too bad.

Well, you're getting a lot on the EMS world because I've been reading about that also is really kind of in some of the very discrete components where they're having trouble and that’s really not on the circuit board side..

Got it. Thank you..

[Operator Instructions] And we will move next to Woo Jin Ho with Bloomberg Intelligence. Please go ahead..

Great. Thanks for taking my question. I just have one quick one in terms of the cellular phone market. I appreciate that you expect [monies] to be down on a sequential basis given what’s happened to your largest customer.

But in terms of the near-term visibility, how should we think about timing in terms of the next cycle? I mean could we potentially see orders come in a little bit sooner or late into the June quarter or do you still expect that to be into September quarter? Thanks..

Yes just as I mentioned earlier that because the extent of the technology again from a PCB perspective is rather – we’re not seeing a huge change that allows for what I would call a more standard launch versus last year.

What I can comment on is again you know what other areas that would affect the end product and there we just don't have the visibility. But certainly as we prototype we're very much on schedule for what I would consider a more normal ramp schedule for the phones..

Thanks..

Thank you. End of Q&A.

It does appear there are no further telephone questions. At this time, I would like to turn the conference back over to Tom Edman for any additional or closing remarks..

Thank you. And I'd like to just close quickly by summarizing some of the points we made earlier.

First, in the first quarter we delivered results that were in line with the guidance we provided, while our first half is challenging we are certainly executing well and we're excited by the product ramps in the second half of the year, as well as the integration of Anaren.

Finally, I'd like to thank our employees, our customers, and our investors for your continued support, and wish you all a good evening. Thank you..

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