TTM Technologies, Inc. (TTMI) Q3 2026 Earnings Call Transcript

Operator: Good day, and welcome to TTM Technology. Third quarter 2026 earnings call. This time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Sean Hannan, Vice President of Investor Relations. Please go ahead.

Sean Hannan: Greetings, everyone. Welcome, and thank you for joining us today. I am Sean Hannan, Vice President of Investor Relations for TTM. With me on the call are Edwin Roks, our President and Chief Executive Officer and Daniel Boehle, our executive vice president and chief financial officer. Before we get started, I would like to remind everyone today that the call contains forward looking statements including statements related to TTM's future business outlook. Actual results could differ materially from these forward looking statements due to 1 or more risks and uncertainties, including the risk factors we provide in our filings with the Securities and Exchange Commission, which we encourage you to review. These forward looking statements represent management's expectations and assumptions based on currently available information. TTM does not undertake any obligation to publicly update or revise any of these forward looking statements, whether as a result of new information, future events, or other circumstances except as required by law. Will also discuss on this call certain non GAAP financial measures, such as adjusted EBITDA. Such measures should not be considered as a for the measures prepared and presented in accordance with GAAP. And we direct you to the reconciliations between GAAP and non GAAP measures included in the company's earnings release which is available on the Investor Relations section of TTM's website at investors.ttm.com. We have also posted on the website an earnings presentation that we will refer to during the call.

Edwin Roks: Here is Edwin. Thank you, Sean. Good afternoon, everyone, and thank you for joining us for our third quarter 2026 conference call. TTM Technologies, we are focused on designing and manufacturing complex, advanced interconnect products and printed circuit boards in addition to what we term as up-the-chain products and solutions such as sophisticated RF modules resulting in subsystems and fully integrated mission systems communications and sensing purposes. Core to the design of all our products and solutions as well as the strategy of our business is the innovative focus to safely next generation needs for our customers and end markets. Particularly regarding swap or size, weight, and power. We believe the future of electronics lies in speed to market high reliability, and efficient technology integration and we consequently engage early with our customers often multiple-- multiple years in advance as part of their program roadmaps ensure this alignment while also enabling optimal management of their complex supply chains. Continues to be a very successful year for TTM so far. Our third quarter sets another new record with over $1.2 billion in revenue, and we expect to close out the year strong aided by increased shipments of our M plus M product offerings for data center and networking end market in addition to continued strong demand for TTM's aerospace and defense business and product offerings. Composal activity in our aerospace and defense business remain at all time highs and a record backlog of $2 billion We already have visibility into roughly 65% of our projected A and D revenue for 2027. Our medical industrial and instrumentation and automotive end markets also outperformed our expectation year to date. With all our business performing well in 2026 to date, we are increasing our full year 2026 revenue guidance from 4.47 to $4.49 billion. Since our last quarterly earnings call, we have had many exciting developments here at TTM, and we continue to execute our long term business strategy focused on predictable value creation for our customers and shareholders. As we framed at our Investor Day in May, TTM continues to invest in organic growth opportunities and technological advancements across our product offerings for all our end markets. In addition to strategic M&A, to enhance our capabilities and add diversification and longer term structural enhancements. To that end, we discussed 3 key strategic directives. First, investment in capacity and innovative technology for advanced interconnect. As previously disclosed in this area, we have invested or committed to invest over $1.3 billion in capacity expansion in the 2029 to 2020 time frame across both our data center and networking and aerospace and defense end markets. While our commercial segment is currently the primary target for these investments, our model has proven over time that our investments in our commercial technology advances provide critical value leverage into our A and D offerings as that end market continues to modernize. Last week, we announced an additional $400 million planned investment that is expected to begin in the fourth quarter of 2026 and continue into early 2028. And this would primarily support revenue production focused on the 2028 period. The basis of this additional investment provides critical commercial data center and networking end markets customer support, in their strong demands and growth factory requirements to utilize our unique N+M product approach. Recall, the majority of our customer business in this market currently is with our industry leading innovative established and seminal AI players. We remind investors that our fundamental business model has been and continues to be what we discussed at the Investor Day, and that is to pursue a very disciplined risk reduced brownfield expansion approach for internal organic investments with the expectations to fund these efforts from operating cash without any anticipated needs to access our borrowing facilities. These investments have been given substantial forethought, purposeful aligned with our customers and not simply reactive to the strong demand environment. Our commitment to these investments is driven by our confidence in our projected cash flows supported by our visibility through the anticipated strong demand requirements of our differentiated and advancing technologies. We are also in the early stages of investing in a new innovation center in the Eau Claire, Wisconsin facility. Very close to our existing technology center in Chippewa Falls, Wisconsin. This facility will spearhead our intensified R&D activities focused on pioneering technological advances such as MSAT, SAP, passive, and embedded optics. Among other technologies. Second, recall that we are extremely focused on our diversified business model. And that as part of this, we have pursued our initial geographic expansion in the European region. In June, we announced our intention to acquire 2 well established European companies. Swiss Technology Group AG, and ILFA GmbH. To begin this effort. We have since closed the Swiss Technology Group AG acquisition now called TTM Switzerland, and we believe we are nearing the close of ILFA GmbH. On Monday, we announced the planned acquisition of Ophir, which would establish a presence in Israel and Romania. I will share some additional comments on Ophir in a few moments. Additionally, we engaged last week in plans to acquire 2 small but strategic printed circuit board companies under the Merlin PCB Group Holding Company. In The United Kingdom. We are excited that all these transactions are both strategic from a technology and capability standpoint and also in terms adding international diversification to our business information model. Finally, our third strategic directive is investment in what we call up the chain of vertical product solutions with a focus on communication and sensing. In line with this directive, we acquired Epic Solutions which is closed on September 30. We are excited to welcome the Epic team members into TTM as we continue the integration activities. The announced plan to acquire Optics also supports the theme of up-the-chain both these companies bring a unique set of competencies that will deliver differentiated and high value solutions to our end markets. I now provide a few additional comments on the proposed acquisition of Ophir, before we move on to discuss our operating results of the quarter. Ophir is a global leader in precision infrared thermal imaging, and laser optics solution for defense, homeland security, and industrial applications. Locations in Israel and Romania. With Ophir's market leading advanced infrared and laser optical components, we can offer our customers solutions where we get and we can combine these optics with our other in house modalities and our interconnect capabilities. This applies for both AMD and industrial applications. In AMD, we expect to have the opportunity to combine infrared optics and RF radar systems offer customers a highly integrated and very small form factor mission subsystem for unmanned and counter unmanned aerial systems. Both critical to modernize defense priorities. On top of that, EPIC will add processing capabilities optics, and processing are the key differentiators in any optical sensing system. Consequently, expect the potential combined offerings of EPIC solutions and Ophir can advance a common strategy moving up the defense value chain and bringing together complementary software defined radios and infrared capabilities. Both are keys to expanding our role in mission critical, sensing modalities such as surveillance, reconnaissance, communications, and electronic warfare. In industrial, this proposed acquisition provides laser optical subsystems used for shaping laser beams in industrial cutting, welding and PCB drilling machines. We are very excited for the opportunities ahead. From a financial perspective, proposed acquisition of Ophir is projected to incrementally benefit our financial model by adding more high margin, long cycle business to our mix. Me go through the financial highlights with you. We are acquiring Ophir business for an all cash purchase of $650 million as a carve out from MKS. The transaction is expected to be funded through a combination of cash on hand and doors borrowings under TTM's existing revolving credit facility. At this time, we believe it is important to convey to all our shareholders that we do not have any current incremental needs or plans to come to the financial markets to access capital. On timing, we expect to close this in the second quarter of 27 subject to regulatory approvals and other customary closing conditions. Ophir experiencing strong revenue growth and margin expansion and the transaction is expected to be immediately accretive to our adjusted EBITDA margins and our non GAAP diluted EPS. The transaction multiple estimated to be roughly 10 times the expected Ophir full year 2027 adjusted EBITDA without synergies. TTM's net leverage at closing is expected to be less than 2x adjusted last 12 months EBITDA and therefore within our targeted leverage range. I will now move on to an overview of our business highlights from the quarter. Then we will follow-up with a summary on our Q3 26 financial performance our Q4 and full year 2026 guidance and our initial preliminary guidance for 2027. From a demand standpoint, product development with our partners bookings, and backlog and broader signals in both AI and defense remain strong and are expected to provide very healthy growth momentum for the remainder of this year and as we look in 2027. Interact very closely with our customers and strategic partners and jointly engage in very diligent conversations to plan for the future. Mike thoughtful investments and take a disciplined approach to better our outlook we believe provides us with a lot of optimism as will be at evidenced in the guidance that Daniel will share shortly. We delivered an excellent third quarter of 2026, And as always, I would like to thank our employees for delivering these results. We achieved a sales of $1.2 billion and non GAAP EPS of $1.46 per diluted share both above our guidance and both all time quarterly highs. James for consolidated TTM grew 60% year on year, reflecting demand strength in our data center and networking end markets, driven by AI, while our medical, industrial, and instrumentation sales almost doubled from a year-- doubled from a year ago. And aerospace and defense end markets experienced very strong double digit growth. The company's adjusted EBITDA margin was 20.1 in the third quarter of 2026, up an impressive 400 basis points year on year and over 350 basis points sequentially. Reflecting positive mix impacts and operational excellence. Non GAAP EPS of $1.46 per diluted share was 118% improvement year on year. The aerospace and defense end market represented 34% of third quarter 2026 sales. James in the aerospace and defense market grew 21% year on year in the third quarter with the vast majority of our facilities performing at strong levels. The sales growth in the defense market continues to be the result of positive tailwinds in defense budgets, our strong strategic program alignment and key bookings for new and ongoing programs. Our ability to support sustained long term growth is also very encouraging and further enabled by our recent strategic acquisitions. Our focus on product innovation is tracking well against our internal road maps for many new capabilities, including unique advancements in printed circuit board technologies for materials that enable high frequency and support for all our applications. During the third quarter of 2026, our a and d teams effective execution continued in securing another strong bookings quarter. Capturing business related to the service ship surveillance by 6 radar the APS 3 maritime surveillance radar, Golden Dome, and a number of projected and priority restricted programs. A and D's book to bill ratio was roughly 1.6x for the quarter which led to program total program backlog of $2 billion, a record level up from just under $1.5 billion a year ago. Within our backlog, we are excited to report that we have strong momentum securing new business from neo primes as well as restricted programs. Expected programs are incredibly sticky and very difficult for competitors to try in this place. For the fourth quarter of 2026, we expect this end market to represent a approximately 31% of our total sales and continue to delivering both year on year and sequential growth. For the full year 2026, we now expect this end market to deliver approximately 20% growth compared to 2025. Including contributions from acquired businesses of roughly 80% on an organic basis. James in the data center and networking end market represented 41% of third quarter 2026 sales. This end market experienced 115% year on year growth in the third quarter, reflecting the strong ramp of our high technology N+M asymmetrical printed circuit boards and continued demand strength from data center and networking customers. For the fourth quarter of 2026, we expect this end market to represent approximately 49% of net sales as our N+M boards continue to experience strong uptake at customers. For the full year 2026, we continue to expect sales in this end market to be more than double year on year. The medical, industrial, and instrumentation end market represented 18% of the third quarter 2026 sales. This end market saw year on year growth of 97% during the third quarter, aided by price adjustments to fully capture the value add of our technology in addition to particular demand strength in instrumentation for automated test equipment supporting AI solutions. For the fourth quarter of 2026, we expect the medical, industrial, and instrumentation end market to represent approximately 14% of total sales growing roughly 90% year on year. For the full 2026, we now expect sales in this end market to grow nearly 70% year on year. Automotive sales represented 7% of third quarter 2026 sales, and was up 11% year on year. Continue to be very selective in this market to focus on higher value add products that carry margin profiles consistent with our financial goals. Given conversations with customers, we are seeing additional share opportunities as some competitors reduce their market participation, while long term business cycles are showing signs of migrating back towards our advanced capabilities. For the fourth quarter of 2026, we expect the automotive end market to represent about 6% of total sales which reflects encouraging double digit growth as we digitally push out the challenge of supply chain materials availability discussed last quarter. For the full year 2026, we now expect sales in this end market to improve mid single digits versus our prior expectations for mid single digit decline year on year. Overall book to bill was a remarkable 2.1x for the third quarter of 2026, with commercial reporting segment at 2.5x and the A&D reporting segment at 1.6x. At the end of the third quarter of 2026, the 90 day backlog which is subject to cancellations, was $1.3 billion compared to $610 million a year ago. At 111% increase year on year. Now Dan will summarize financial performance in more detail. Daniel?

Dan Bailey: Thanks, Edwin, and good afternoon, everyone. I will review our financial results for the third quarter of 2026, that were included in the press release distributed today. Key financial highlights are also summarized in the earnings presentation posted on our website. For the third quarter, net sales were $1.2 billion compared to $753 million in the third quarter of 25. The 60% year over year increase was due to growth across all our end markets. Most notably continued strength in data center and networking, medical industrial and instrumentation, and aerospace and defense. GAAP operating income for the third quarter of 2026 was $162 million compared to GAAP operating income for the third quarter of 25 of $71.9 million On a GAAP basis, net income in the third quarter of 2026 was $84.8 million or $0.79 per diluted share. This compares to GAAP net income for the third quarter of 25, of $53.1 million or $0.50 per diluted share. The remainder of my comments will focus on our non GAAP financial performance. Our non GAAP performance excludes M&A related costs, restructuring costs, certain noncash expense items such as amortization of intangibles, impairment of goodwill, stock based compensation, gains on the sale of property, unrealized gains or losses on foreign exchange, and other unusual or infrequent items. We present non GAAP financial information to enable investors to see the company through the eyes of management, and to facilitate comparisons with the expectations and prior periods. Gross margin in the third quarter of 2026 was 24.8%. An increase of 303 basis points from 21.5% in the third quarter 25. The year on year increase was due primarily to higher sales volume and favorable product mix. Particularly in the data center and networking, and aerospace and defense end markets. In addition to execution improvements at our facility in Penang, which we continue to expect to approach breakeven in the fourth quarter of 2026. Selling and marketing expense $23.2 million in the third quarter. Or 1.9% of net sales. Versus $20.5 million or 2.7% of net sales a year ago. Third quarter general and administrative expense was $57.3 million or 4.8% of net sales. Compared to $42.1 million or 5.6% of net sales a year ago. Third quarter research and development expense was $9.5 million or just under 1% of net sales. Compared to 6.9 million or just under 1% of net sales in the prior year. Our operating margin in the third quarter of 2026 was 17.4%, a 510 basis point improvement from 12.3% in the same quarter last year. The increase in the period was due both to the improvement in gross margin as well as operating leverage resulting from selling, general, and administrative expense discipline. Adjusted EBITDA was $242 million in the third quarter of 26. A record quarterly adjusted EBITDA margin of 20.1% and up 400 basis points year over year. This compares to adjusted EBITDA of $121 million in the third quarter 25, with an associated adjusted EBITDA margin of 16.1%. Interest expense was $12.1 million in the third quarter of 2026, compared to $9.9 million in the same quarter last year. Interest and other income was $3.1 million in the third quarter of 2026, compared to $2.5 million in the same quarter of last year. Realized foreign exchange loss in the third quarter of 2026 totaled $4.1 million as compared to $1.8 million in the same quarter last year. Driven by the weakening of the U. S. Dollar. Our effective tax rate was 19.5% in the third quarter of 2026, resulting in tax expense of $38.2 million This compares to an effective tax rate of 15%, or a tax expense of $12.5 million in the same quarter last year. Third quarter 2026 non-GAAP net income $158 million or $1.46 per diluted share. This compares to third quarter 25 non GAAP net income of $71 million or $0.67 per diluted share. Cash flow provided by operating activities was $155 million in the third quarter of 2026, which compares to cash flow provided by operating activities of $142 million the same quarter last year. Free cash flow in the third quarter of 2026 was $74.8 million as compared to free cash flow of $42.6 million in the third quarter of last year. Now we will provide our financial guidance for the fourth quarter of 2026, an update to our outlook for the full year of 2026, and an initial preliminary expectation for the full year 2027. We project net sales for the fourth quarter of 2026 to be in the range of $1.42 billion to $1.44 billion and non GAAP earnings to be in the range of $1.77 to $1.83 per diluted share. These projected results include the contributions of recently closed transactions and associated financing, However, they exclude any contribution or impact from pending acquisitions. Consequently, we now expect full year 2026 sales of approximately $4.47 billion to $4.49 billion and non GAAP earnings in the range of $4.97 to $5.03 per diluted share. These full year 2026 projections also include the contributions of recently closed transactions and associated financing, but exclude any contribution or impact from pending acquisitions. The fourth quarter 2026 non-GAAP diluted EPS is based on a diluted share count of approximately 107.8 million shares which includes the dilutive effect of outstanding stock options, other stock awards. Our expected full year 2026 non-GAAP EPS forecast based on a diluted share count of 107.5 million shares. Similarly including the effect of outstanding stock options and other stock awards. We expect SG&A expense to be approximately 0.7% of net sales in the fourth quarter and R&D expenditures to be approximately 1% of net sales. We expect interest expense of approximately $33.9 million interest income of approximately $3 million and realized foreign exchange and other nonoperating expenses of approximately $4.7 million We estimate our effective tax rate will be between 15% and 19%. Further, we expect to record depreciation of approximately $39.7 million amortization of intangibles of approximately $12.1 million stock based compensation expense of approximately $18.7 million and noncash interest expense of approximately $900 thousand. Looking to the preliminary full year 2027 forecast, we are providing our initial net sales forecast to be in the range of approximately $6.5 billion to $6.75 billion. And non GAAP net income is expected to be in the range of $8.10 to $8.90 per diluted share based on the diluted share count of 108.1 million shares. Including the effect of outstanding stock options and other stock awards. Our initial 2027 full year forecast includes contributions from recently closed acquisitions and associated financing costs. While excluding any contribution or impact from pending acquisitions. And finally, I would like to announce that we are scheduled to participate in the Bank of America Leverage Finance Conference in Boca Raton, Florida on December 1, and the UBS TMT Conference in Scottsdale, Arizona on December 2. That concludes our prepared remarks. So I will turn it back to you, Sherry, for the Q&A session.

Operator: Thank you. Press *1 on your telephone and wait for your name to be announced. To withdraw your question, press *11 again. Due to time restraints, we ask that you please limit yourself to 1 question and 1 follow-up question. And our first question will come from the line of Steven Fox with Fox Advisors. Your line is open.

Steven Fox: Hi. Good morning. I guess my first question, was wondering if we could sort of dig into the N plus M results to date and expectations going forward. Can you give us a sense for how much of the quarter was driven by the new product where you think you are in terms of ramping yields, etcetera, and then how broad based, you know, the product is expected to be used? I am just trying to understand like how dominant this is becoming within your traditional PCB sales? And I had a follow-up.

Edwin Roks: Steven. Steven, good morning. Yes. Happy to do that. Our N+M program is, there will be a substantial part of the. Of our data center and networking group as you as you know. Ramp ups are going really well. it is currently about 30% of the data center and networking activities, and it will grow next year to about 50% of that of that group. Your ramp up is going really well. We have 3 major programs 2 of them are doing really well. 1 of them is, let's say, a bit moving to the right. This has nothing to do, by the way, with any technical issue, has nothing to do with our performance. It basically has to do with the program schedule that of that customer. Which is which is which is a normal thing with these big programs. So far, we are getting very, very positive feedback on our N+M program. There are more N+M programs coming. I mentioned before that this will be the 5 to 10 programs all around. So that. that is going that is going well. Yeah. Steven, there will always be a bit of fluctuation in these programs. These programs are so big, so there will always be a bit of fluctuation. There is also a bit of pull forward to Q3. I can tell you some of things are even enhanced, so that will be a fact. But again, currently, about 30% of the of the data center and networking business going into next year about 50%. So that technology is working really well. Great. that is helpful.

Dan Bailey: And then just to be crystal clear, you on the. On all the M&A you have done and how you are planning to finance it, Can you sort of talk about where this leaves you? what is the potential for more M&A once you close all these deals? And just big picture thoughts on balance sheet since you have been pretty active in the acquisition market the last few months? Yes, Steven, this is Dan. I will take that. Thanks for the question. Yeah. I think, this will be the end of the big stuff for a while. You know, there may be a few little things that, you know, we have announced a few that we need to close. And they are, you know, 1 of those kinda medium size, the other smaller. So we will focus on, you know, strengthening our balance sheet, getting our leverage back down now. Got a lot of strong cash flow coming in next year. We will have positive free cash flow. To continue to fund our capital expenditures as well as start paying down that debt. But in our Q4 guide, you know, so the difference between where we were last quarter and this quarter, we do have 2 of the businesses that have closed, or expected to close in this period or closed right at the end of Q3 into Q4 will impact, you know, positively on our EBITDA but, you know, we did raise significant debt for the purchase of Epic as well as to finance the Ophir product that we just announced. So that has an increase of interest expense for about 20 million a quarter. So that drags on our EPS. And so you look at the change in EPS guidance from last quarter to where we are now, up from the transactions, but then offset by the debt.

Edwin Roks: Great. that is really helpful. Thank you.

Operator: Thank you. 1 moment for our next question. That will come from the line of Will Stein with Truist. Your line is open.

William Stein: Thanks for taking my questions. First, I want to recognize and say congratulations on the great results. Overall. But I want to also recognize that the data center networking end market came about 10% below your prior guidance in Q3. And so I am hoping you can help us understand what happened there. Was it supply? Or you know, like, availability or yield or something else?

Edwin Roks: Will. Good morning. No. None of these things. These things basically have to do with project timing. On the customer side. Again, these large customers, these big customers, we have, they have multiple programs and there are always fluctuations in these programs. Some of them move to the left some of them move a bit to the right. Again, there are no technical issues. Ramp is going well. Yields numbers are yield numbers are where they should be. Again, they have always multiple suppliers. So there is always a bit of, let's say, everybody has to be in that same window. Technology wise. So that is that is sometimes hurting us also a bit. But, again, 2 out of these 3 programs we initially had are doing really well. The third 1 is ramping up now. That will that will be in ramp up in the second half of Q4, fully in production in Q1. that is going smooth. And it is like I said, before, there are more N+M programs coming. But again, there will always be a fluctuation, and we always try to be as accurate as possible in our guidance. But, again, there are no major issues there. Appreciate that. As a follow-up, Edwin, last quarter, I believe, you told us that N+M would be approximately 200 million in Q3. And approximately 400 million in Q4. It sounds like in Q3, that might have been a little light, but, you know, not entirely sure. Maybe you can update both these numbers for us, please. Yeah. Sure. In Q3, of the full data center networking business, it was about 30% of our business was based on N+M. Call it, let's say, 31% of 400 million something like that. In Q4, we expect about the same percentage, about 30% out of, let's say, the. As a 700 million data center and networking forecast. So these are about the numbers. So the ramp up is going well. Is it exactly the 200 and the 400? No. Probably not. It will be slightly more than 200 and slightly below the 400. But, again, like I said, next year, it is about 50% of the full data center and networking business. So the things are just fluctuating a bit. But again, no big deal there. Thank you.

Operator: Thank you. 1 moment for our next question. And that will come from the line of Mike Crawford with B. Riley Securities. Your line is open.

Mike Crawford: Thank you. Can you give some color on supply availability of key materials, like CCL and T glass and also how you match any increasing prices with the quotes?

Edwin Roks: Sure, Mark. Lead times let's say, are, let's say, in the order of, let's say, 12 weeks sometimes a bit longer, sometimes 24 weeks, sometimes even a bit longer depending on the on the materials. So far, I think we are handling this very well. On the a and d side, I think everything is solid. On the on the data center and networking side, it is an ongoing activity. Yes. Lead times are going up, but we are also let's say, these programs are getting bigger. So we have much more visibility on these things. If you look at the costs, yes, the costs are going up. But so far, let's say, we are very transparent with our customers. And the customers will take these price increases. And it is like I said, the, the N+M is having a higher ASPs. So that is that is helping us a lot. So price increases, yes, the customers will absorb that.

Mike Crawford: Okay. And then just to follow-up related, the higher ASP for the N+M, yeah, we understand that. But would you say that is higher than corporate average gross margin? And I guess related where-- yes. Do you see gross and EBITDA margins progressing throughout 2027.

Edwin Roks: Yes. Yes. Yes. These ASPs are going are going faster than our cost. And that has to do with the complexity of the boards. The complexity is increasing a lot for these boards. So, basically, it is all about the value. I rather do not talk about cost and ASP. I rather think about the value. We are taking much more value in these in these data centers and networking configuration. So that is that is helping us a lot. it is about it is about the factor 4 if you compare it with, let's say, conventional architectures, N+M is really is really adding a lot, let's say, in complexity. And of course, the customers are willing to pay for that. Thank you. Yeah.

Dan Bailey: Yeah. Mike, maybe I will just add You mentioned about EBITDA, right? So yes, our EBITDA margins will be increasing our gross margin on that N+M product. Is significantly higher than our corporate average, and so as that becomes more of the mix, our gross margin as well as our EBITDA margins will be increasing you know, more than 200 basis points in the next year. Alright. Thank you, Dan.

Operator: 1 moment for our next question. And that will come from the line of Ruben Roy with Stifel. Your line is open.

Ruben Roy: Yes. Thank you. Edwin, I wanted to first follow-up on Will's question. On the N+M shift. If you think about Q4 and guide there with $700 million of revenue for DC, How much is that coming from acceleration in customer demand versus maybe recovering some of the pushed-to-the-right N+M? If you could start there.

Edwin Roks: Yeah. Hi, Ruben. These are these are indeed programs. And like I said, they move a bit. it is like I said, it is about 30% of the of the 670 million in commercial. And the $400 million capacity expansion, it sounds like that will be fully operational on 2028. Can you talk about what kind of customer volume visibility you have against that increased commitment And are customers committing to programs against that spend? Thank you. Yeah. Yeah. Happy to do that. The $400 million is going on top of something we addressed earlier. €1.2 billion expansion, let's say, over multiple years until 2029. The $400 million is, I would say, more allocated to N+M. So I would say the 400 million is pure N+M, rounding numbers here. Yeah? You have to you have to think about our brownfield approach. So, basically, what we are very good at and you see it in China, and I gave several examples during the investor meetings. Is that we build up brownfields. So, basically, buildings close to our existing plants, you know, we are going to utilize for additional capacity. We do that very, very fast, and we can we can follow the much, much more accurate. So that is that is basically all of that. it is a it is a lot of equipment, Ruben, which we are installing there. To grow our N+M. it is like I said, you know, our data center and networking business, 50% of that will be N+M. So that is that is going really well. The technology is really doing what it should do. Great. Thanks, Edwin.

Operator: 1 moment for our next question. And that will come from the line of Jim Ricchiuti with Needham. Your line is open.

Jim Ricchiuti: Thank you. Good morning. Hopefully, you can hear me okay? Yes. I can hear you. Great. So I wanted to just ask you about the preliminary 2027 guidance. Jim, relative to relative to your earlier expectations for the growth that you are expecting now for 2027, how much of that is due to perhaps higher N+M expectations or data center or possibly how much is due to higher organic growth in the A and D business?

Edwin Roks: Yeah. So if you look at the numbers, let's say, for this year, the $4.4 billion to $4.5 billion, let's say, is a is a 48% growth year over year. Yeah? This is this is a number we are going we are going to repeat next year. Yeah? And, again, next year, we will grow 50%. Substantial part of that growth will be N+M. The interesting thing, Jim, is that all the different end markets are growing. So if you look at our medical, industrial, instrumentation business, it is growing a lot, and it will continue to grow in next year. If you. Even if you look at our automotive business, it is growing over. Year over year. And, of course, our aerospace and defense business is growing a lot next year. So that is. It is just a matter that data center and networking is going so fast that it does not look like the others are growing. But I can tell you, it is growing over 20%. Yeah. That is that-- these are these are big, big, big numbers. So, yes, we are confident with the numbers we predicted for 2027. Got it. Follow-up question relates to the M&A activity. So we have EPIC, other smaller M&A that you have done, and the pending Ophir acquisition. If we look out to next year after Ophir closes, how much of the A&D business is going to be non-PCB in nature?. At the moment, if you look at our air space and defense business, about half of it is what we call up the chain. So our, let's say, sensing and communication activities. If we look at Epic, yeah, and Ophir By the way, they are very complementary. Yeah. If you look at Epic, let's say that is more the processing. And Ophir, we are very happy with that 1 as well. that is more the optical side. If you if you if you have the optical side and, let's say, the processing on the control, and your sensor agnostic, you basically can make full sensing systems, which are very consistently used in. Complementary to our radar activity. So that is that is going well. If you look at the numbers, all of our acquisitions and, of course, Ophir will only add let's say, the second part of the year because we only close it, say, in, hopefully, in Q2. At the end of Q2. So we have only 1 half year of that of over year. Then I would say, if you add up all these acquisitions, it is about 500 million in sales. Of the of the $6.75, 6.5 billion for next year. So that. that is about that is about the ratio. Got it. Thank you. Yep.

Operator: Okay. Thank you. 1 moment for our next question. And we do have a follow-up question from Will Stein with Truist. Your line is open.

William Stein: Thanks for taking the follow-up. I wanted to ask about Ophir. When we look at the EBITDA multiples cited in your press release, and in the seller's press release, 1 conclusion is that EBITDA is growing very significantly or you expect it to grow very significantly from 2027 to 2020 what is driving that? Is that backlog that is already in place? Or is that stuff that you expect to get design wins after the close? Any color to sort of explain this to us? Yes.

Edwin Roks: Yes. Well, it is a very good question. and you-- yes, you get the answer. Yourself. The thing is, if you look at the if you look at the bookings, for 2027, Ophir is over 85% booked. With new things coming in. By the way, they have a tendency that they always beat that forecast, by the way. So 2027 is 80% booked. The 10.3 we addressed as being the multiple. EBITDA over the price we pay is probably even a bit more conservative. We did. I think it was it was a very, very nice deal for us around 10x. So we are very happy with that. And it is like I said, the synergies are not taking into the business case at all. But synergies will be huge because this is giving us the optical system. We have the processing. We can be sensor agnostic. That basically means we can make a full optical system. it is a very nice acquisition for us.

William Stein: And then as a follow-up, you have now given us a preliminary view on 2027. Normally, when you have guided revenue, you have given us some breakdown by end market. I wonder if you are willing to do that in this case for 2027, how we should think about each end market as percentage of revenues?

Edwin Roks: it is a bit early for that, Will. But, of course, we will provide more color. Again, we, again, only a few quarters ago, we gave only, let's say, forecast for the next quarter. Now let's say we are giving a bit more guidance for the for the full year. You have an idea what our data center and networking business is doing, how that will grow, Our aerospace and defense business will do will do better and better. Let's say, looking at the munitions side, looking at looking at the Golden Dome side, a lot of radar, So that will do better and better. it is it is a bit early to give that exact split. But we wanted to give some guidance for 2027. And showing that we are maintaining that growth. Yeah.

Dan Bailey: Well, I think we have done that in the past in the fourth quarter call, and so we will strive to give that. We will be able to get that in the next call. Thank you.

Operator: Thank you. I am showing no further questions in the queue at this time. I will turn the call back over to Mr. Edwin Roks for any closing remarks.

Edwin Roks: Yes. Thank you. This has been a good call. So I thank you, operator. And now let's say, summarize with a few items. First of all, we are seeing strong, very strong growth. We delivered very strong sales growth in Q3 of about 60% year on year. Resulting in an all time high of $1.2 billion for quarterly revenue. Driven by an increase in our data center and networking, medical, industrial, instrumentation, aerospace and defense market. Basically, all the markets help there. Second, our adjusted EBITDA was 20.1%, reflecting strong operating improvements and overall performance, leading to another all time high record in non GAAP EPS As a result, $1.46 per diluted share, and we expect to continue building on this operating performance in the coming quarters. And third, we continue to generate solid cash flows from operations, which is used as our source to invest in our organic operations and to support projected continued growth. In closing, and I said it before, I would like to thank all our employees of TTM, our customers, our suppliers,, and our shareholders for your continued support. And thank you very much. Goodbye.

Operator: Thank you all for participating. This concludes today's program. You may now disconnect.