TTM Technologies, Inc. Aktie

Good day, and welcome to TTM Technologies Third Quarter 2026 Earnings Call. [Operator Instructions] 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.

Greetings, everyone. Welcome, and thank you for joining us today. I'm Sean Hannan, Vice President of Investor Relations for TTM. With me on the call are Edwin Roks, our President and Chief Executive Officer; and Dan Boehle, our Executive Vice President and Chief Financial Officer.

Before we get started, I'd 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 one 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.

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 use 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 and earnings presentation that we will refer to during the call. Here is Edwin.

Thank you, Sean. Good afternoon, everyone, and thank you for joining us for our third quarter 2026 conference call. At TTM Technologies, we are focused on designing and manufacturing complex advanced interconnect products and printed circuit boards in addition to what we term up as up to chain products and solutions such as sophisticated RF modules resulting in subsystems and fully integrated mission systems for 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 times, multiple years in the plant as part of their program road maps to ensure this alignment while also enabling optimal management of their complex supply chains.

It 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 ample product offerings for data center and networking end markets in addition to continuing strong demand for TTM's aerospace defense business and product offerings.

Proposal activity in our aerospace and defense business remain at all-time highs with a record backlog of $2 billion. We already have visibility into roughly 65% of our projected A&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 billion 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 projected value creation for our customers and shareholders.

As we said 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 three 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 2025 to 2029 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 advantages provide critical value to leverage into our A&D offerings as that end market continues to modernize.

Last week, we announced an additional $400 million client investments 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 initial investment provides critical commercial data center and networking end market customer support and their strong demand and low meter requirements to utilize our unique and present product approach. Recall, the majority of our customer business in this market currently is with our industry-leading innovative established and [ chemical AI ] players.

We remind investors that our fundamental business model has been -- 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 forecast are perf 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 is has our intensifying R&D activities focused on pioneering technological advances such as mSAP, SAP, passives 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've pursued our initial geographic expansion in the European region. In June, we announced our intention to acquire two well-established European companies, Swiss Technology Group and the ILFA to begin this effort. We've since closed the Swiss Technology Group acquisition now called TTM GS Swiss and we believe we are nearing the close of ILFA.

On Monday, we announced the planned acquisition of Ophir Optics which established a presence in Israel and Romania. I'll share some additional comments on of Ophir Optics in a few moments.

Additionally, we engaged last week in plans to acquire two 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 of 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 focus on communication and sensing. In line with this directive, we acquired Epiq Solutions, which is closed on September 30. We are excited to welcome the Epiq team members into TTM as we continue the integration activities. The announced plan to acquire Ophir Optics also supports the team of up to the chain, and 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 Optics before we move on to discuss our operating results of the quarter. Ophir Optics is a global leader in precision infrared thermal imaging and laser optics solutions for defense, homeland security and industrial applications with locations in Israel and Romania.

With Ophir market-leading advanced infrared and laser optical components, we can offer our customers solutions where we -- and we can combine these optics with our other in-house modalities and our interconnect capabilities. This applies for both A&D and industrial applications.

In A&D, we expect to have the opportunity to combine infrared optics and RF radar systems to offer customers a highly integrated and very small form factor mission subsystem for unmanned and countermand area systems, both difficult to organize defense priorities.

On top of that, Ophir Optics will add processing capabilities. Optics and processing are the key differentiators in any optical sensing system. Consequently, we expect the potential combined offerings of Epiq solutions and of Optics can advance a common strategy moving up the defense value chain and bringing together complementary software-defined radios and infra capabilities.

Both are keys to expanding our role in mission critical sensing modalities such as surveillance, recognizance, 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, the proposed acquisition of Ophir Optics is projected to incrementally benefit our financial model by adding more high-margin long-cycle business to our mix.

Let me go through the financial highlights with you. We are acquiring Ophir Optics 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 borrowings under TTM's existing revolving credit facility. And at this time, we believe it's important to compare 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 2027, subject to regulatory approvals and other customary closing provisions. Ophir Optics experiencing strong revenue growth and margin expansion and the transaction is expected to be immediately native to our adjusted EBITDA margins and our non-GAAP diluted EPS.

The transaction multiple is estimated to be roughly 10x the expected Ophir Optics full year 2027 adjusted EBITDA without synergies. TTM's net leverage at casing is expected to be less than 2x adjusted last 12 months EBITDA and therefore, within our targeted leverage range. I'll now move on to an overview of our business highlights from the quarter. Then we'll follow up with a summary on our Q3 2026 financial performance, our Q4 and full year 2026 guidance and our initial preliminary guidance for 2027.

From a demand standpoint, product developments 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. We interact very closely with our customers and strategic partners and jointly engaged in very diligent conversations to plan for the future with thoughtful investments and take a disciplined approach to vet our outlook, which we believe provides us with a lot of optimism as will be evidenced in the guidance that Dan 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.

Sales for consolidated TTM grew 60% year-on-year, reflecting demand strength in our data center networking and markets, driven by AI while our medical, industrial and instrumentation sales almost doubled from a year ago. And the 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-over-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. Sales 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 advances in printed circuit board technologies for materials that enable high frequency in support for all our applications.

During the third quarter of 2026, our A&D team's effective execution continued in securing another strong bookings quarter. Executing business related to the service surveillance by six radar, the APS 143 maritime surveillance radar, Golden Dome and a number of projected priority restricted programs. A&D's book-to-bill ratio was roughly 1.6% for the quarter, which led the 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 in securing new business from new 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 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 or roughly 80% on an organic basis.

Sales in the data center and networking end market represented 41% of third quarter 2026 sales. These end markets experienced 115% year-on-year growth in the third quarter, reflecting the strong ramp of our high-technology N+M asymmetric printed circuit boards and continued demand 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 most Board 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. We 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 a mid-single-digit decline year-on-year.

The overall book-to-bill was a remarkable 2.1% for the third quarter of 2026, with the commercial reporting segment at 2.5% and the A&D reporting segment at $1.6 billion. 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 then we'll summarize the financial performance in more detail. Dan?

Thanks, Edwin, and good afternoon, everyone. I'll 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 2025. The 60% year-over-year increase was due to growth across all our end markets and 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 $162.3 million compared to GAAP operating income for the third quarter of 2025 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 2025 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 improved good items. We present non-GAAP financial information to enable investors to see the company through the eyes of management and to facilitate comparison with expectations and prior periods.

Gross margin in the third quarter of 2026 was 24.8%, an increase of 330 basis points from 21.5% in the third quarter of 2025. 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 was $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 $242.3 million in the third quarter of 2026, a record quarterly adjusted EBITDA margin of 20.1% and up 400 basis points year-over-year. This compares to adjusted EBITDA of $120.9 million in the third quarter of 2025 and 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, resulted 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 was $157.8 million or $1.46 per diluted share. This compares to third quarter 2025 non-GAAP net income of $71 million or $0.67 per diluted share. Cash flow provided by operating activities was $154.7 million in the third quarter of 2026, which compares to cash flow provided by operating activities of $141.8 million in 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 I'll provide our financial guidance for the fourth quarter an update to our outlook for the full year of 2026 and an initial preliminary expectation for 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 forecast is based on a diluted share count of approximately 107.8 million shares, which includes the dilutive effect of outstanding stock options and other stock awards. Our expected full year 2026 non-GAAP EPS forecast is based on a diluted share count of 107.5 million shares, similarly, including the effect of outstanding stock options and other stockholders.

We expect SG&A expense to be approximately 6.7% 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 $3.0 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 $0.9 million.

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 and to $8.90 per diluted share based on a 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'd like to announce that we are scheduled to participate in the Bank of America Leveraged 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'll turn it back to you, Shire for the Q&A session.

[Operator Instructions] And our first question will come from the line of Steven Fox with Fox Advisors.

I guess my first question, I was wondering if we could sort of dig into the 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, et cetera. And then how broad-based the product is expected to be used.

I'm just trying to understand like how dominant this is becoming within your traditional PCB sales? And then I had a follow-up.

Yes. Steve, yes. Happy to do that. Our N+M program is will be a substantial part of our data center networking group, as you know. Ramp-ups are going really well. It's currently about 30% of the data center and networking activities. And it will grow next year to about 50% of that group.

The ramp-up is going really well. We have three major programs, two of them are doing really well, one 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 of that customer, which is a normal thing with these way programs.

So far, we're getting very, very positive feedback on our N+M program. There are more N+M programs coming. I mentioned before, this will be 5 to 10 programs all around. So that's going well.

Yes, Steve, 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 I can tell you, some of the things are even enhanced. So that will be a fact. But again, currently, about 30% of the data center networking business going into next year to about 50%. So that technology is working really well.

Great. That's helpful. And then just to be crystal clear on all the M&A you've done and how you're planning to finance it. Can you sort of talk about where this leaves you like what's the potential for more M&A once you close all these deals? And just big picture thoughts on balance sheet since you've been pretty active in the acquisition market in the last few months.

Yes, Steve, this is Dan. I'll take that. Thanks for the question. Yes, I think this will be the end of the big stuff for a while. There may be a few little things that we've announced a few that we need to close. And they're one of those kind of medium size, the other smaller.

So we'll focus on strengthening our balance sheet, getting our leverage back down now. We've got a lot of strong cash flow coming in next year. We'll 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, so the difference between where we were last quarter and this quarter, we do have two 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 positively on our EBITDA but we did raise significant debt for the purchase of Epiq as well as to finance the Ophir product that we just announced. So that has an increase of interest expense of 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.

One moment for our next question. That will come from the line of Will Stein with Truist.

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'm hoping you can help us understand what happened there? Was it supply or like material availability or yield or something else?

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. Yield number yield numbers are where they should be. Again, they have always multiple suppliers. There's always a bit of, let's say, everybody has to be in that same window technology wise. So that's sometimes there's also a bit.

But again, two out of these three programs we initially had are doing really well. The third one is ramping up now that will be in ramp-up in the second half of fully in production in Q1. So that's going smooth.

And it's 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 yes, there are no major issues there. I appreciate that.

As a follow-up, and when last quarter, I believe you told us that N+M would be approximately $200 million in and approximately $400 million in Q4. It sounds like in Q3 that might have been a little light, but not entirely sure. Maybe you can update both these numbers for us, please?

Yes, sure. In Q3, of the full data center networking business, it was about 30% of our business was based on N+M. So call it, let's say, 31% or $400 million, something like that.

In Q4, we expect about the same percentage, about 30% out of, let's say, a $700 million data center networking forecast. So these are about the numbers. So the ramp-up is going well. Is it exactly the $200 million and the $400 million. No, probably not. It will be slightly more than $200 million and slightly below the $400 million. But again, like I said, next year, it's about 50% of the full data center networking business. So things I'm just fluctuating a bit. But again, no big deal there.

One moment for our next question. And that will come from the line of Mike Crawford with B. Riley Securities.

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 quotes?

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 materials.

So far, I think we are handling this very well. On the A&D side, I think everything is solid. On the data center networking side, we -- it's 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's like I said, the [ emploxam ] is having higher ASPs, so that's helping us a lot. So price increases, yes, the customers will absorb that.

Okay. And then just to follow up related. The higher ASPs for the [ emploxam ], we understand that, but would you say that's higher than corporate average gross margin. And I guess, related, where do you see gross and EBITDA margins progressing throughout 2027?

Yes, yes, yes. These ASPs are growing faster than our cost, and that has to do with the complexity of the Board. the complexity is increasing a lot for these bars. So basically, it's all about the value. I rather don't talk about cost and ASP. I'd rather think about the value taking much more value in these data centers and networking configurations. So that's helping us a lot.

It's about a factor 4 if you compare it with, let's say, conventional architectures. And plaza is really adding a lot, let's say, in complexity. And of course, the customers are willing to pay for that.

Mike, maybe I'll just add. You mentioned about EBITDA. Our EBITDA margins will be increasing our gross margin on that nose product. is significantly higher than our corporate average. And so as that becomes more than [ megas ], our gross margin as well as our EBITDA margins will be increasing more than 200 basis points in the next year.

One moment for our next question. And that will come from the line of Ruben Roy with Stifel.

Edwin, I wanted to first follow up on Will's question on the N+M shift. If you think about Q4 and the 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 push to the right on [indiscernible]? You could start there.

Yes, these are indeed programs. And like I said, they move a bit. It's like I said, it's about 32% of the $570 million in commercial in CNC, what we call CNC data centers and networking is coming from N+M.

Again, these programs are ramping up. These programs are doing well. And again, the feedback is very, very positive from these larger customers that basically that more N+M programs are coming in.

Okay. And then on the $400 million capacity expansion, it sounds like that will be fully operational in '28. 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?

Yes. Happy to do that. The $400 million is going on top of something we addressed earlier, a $1.2 billion expansion, let's say, over multiple years of 2029.

The $400 million is, I would say, is more allocated to N+M. So I would say the $400 million is pure N+M, rounding numbers here, yes. You have to think about our brownfield approach.

So basically, what we're very good at, and you see it in China, and I gave several examples during the investor meetings is that we build our brownfield. So basically, buildings close to our existing plants, we are going to utilize for additional capacity. We do that very, very fast, and we can follow the market much, much more accurate. So that's basically all of that.

It's a lot of equipment, Ruben, which we are installing there to grow our and present. It's like I said, CNC, our data center networking business, 50% of that will be N+M. So that's going really well. The technology is really doing what it should do.

Moment for our next question. And that will come from the line of Jim Ricchiuti with Needham.

Hopefully, you can hear me.

Great. So I wanted to just ask you about the preliminary 2027 guidance. Relative to your earlier expectations, the growth that you're 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&D business?

So if you look at -- starting to be the numbers, let's say, for this year, the $4.2 billion, $4.5 billion let's say, is a 48% growth year-over-year, yes. This is a number we are going to we're going to repeat next year, yes. And again, next year, we will grow 50%.

A 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's growing a lot, and it will continue to grow in next year.

if you look at our automotive business is growing over -- year-over-year. And of course, our aerospace and defense business is growing a lot next year. So that's -- it is just a matter that data center network is growing so fast that it doesn't look like the others are growing, but I can tell you, it's growing over 20%. Yes, that is -- 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 Epiq other smaller M&A that you've done and the pending Ophir acquisition. If we look out to next year after Ophir closes, how much of's the A&D business is going to be non-PCB in nature now?

At the moment, if you look at our aerospace and defense business, about half of them is what we call up the chain. So our, let's say, sensing and communication activities. If we look at Epiq and Ophir.

By the way, they are very complementary. If you look at Epiq, let's say, that's more the processing. And Ophir, we're very happy with that one as well. That's more the optical side. If you have the optical side and, let's say, the processing under 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's 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 closed it, let's say, hopefully, in Q2, at the end of Q2. So we have only 1 half year of that -- of Ophir. Then I would say if you add up all these acquisitions, it's about $0.5 billion in sales. of the 6.75%, 6.5% for next year. So that's about ratio.

One moment for our next question. And we do have a follow-up question from Will Stein with Truist.

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, one conclusion is that EBITDA is growing very significantly or you expect it to grow very significantly from '26 to '27 million. What's driving that? Is that backlog that's already in place? Or is that stuff that you expect to get design wins after the close? Any color to sort of...

Yes, it's a very good question. And yes, you get the answer yourself. The thing is if we 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 their forecast, by the way.

So '27 85%, 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 a very, very, very nice deal for us around 10x. So we're very happy with that. And it's, like I said, the synergies are not taking into the business case at all, but the synergies will be huge because this is giving us the optical system. We have the processing we can be center agnostic. That basically means we can make a full optical system. So it's a very nice acquisition for us.

And then as a follow-up, you've now given us preliminary view on 2027. Normally, when you have guided revenue, you've given us some breakdown by end market. I wonder if you're willing to do that in this case for '27 how we should think about each end market as a percentage of revenues?

It's a bit early for that, Bill. 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 full year. you have an idea what our data center networking business is doing, how it will grow. Our Aerospace and Defense business will do better and better, let's say, looking at the munition side looking at the Golden Dome side, a lot of radar. So that will do better and better. It's a bit early to give that exact split. But we wanted to give some guidance for '27 and showing that we are maintaining that growth.

Yes. Well, I think we've done that in the past in the fourth quarter call. And so we'll strive to give that. We'll be able to get that in the next call.

I'm showing no further questions in the queue at this time. I'll turn the call back over to Mr. Edwin Roks for any closing remarks. .

Yes. Thank you. It has been a good call. So I thank you, operator. 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 quarter revenue.

Driven by increase in our data center networking, medical, industrial, instrumentation and aerospace and defense markets. Basically, all the markets help there.

Second, our adjusted EBITDA for the second quarter of 20.1% reflected 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 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 to our source to invest in our organic operations and the support projected or continued growth.

In closing, as I said it before, I would like to thank all our employees of TTM, our customers, our suppliers and our shareholders for continued support, and thank you very much. Goodbye.

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

Good day, everyone. Thank you for standing by. Welcome to the TTM Technologies Epiq Solutions Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I will now hand the conference over to Sean Hannan, Vice President of Investor Relations. Please go ahead.

Greetings, everyone. Welcome, and thank you for joining us today. I'm Sean Hannan, Vice President of Investor Relations for TTM. With me on the call are Edwin Roks, our President and Chief Executive Officer; Dan Boehle, our Executive Vice President and Chief Financial Officer.

Before we get started, I'd like to remind everyone that today's 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 one 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.

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 standard accepted GAAP guidelines. We have also posted on the website a slide presentation that we will refer to during our call.

With that, here is Edwin.

Thank you, Sean. It has been a very successful year for TTM so far. Our second quarter set a new record with over $1 billion in revenue. And as we noted in our earnings call, we expect to finish the second half of the year even stronger with the ramp of our N+M product offerings for data center and networking end markets. In addition, we have record program backlog of $1.7 billion and proposal activity at an all-time high in our Aerospace and Defense segments, where we are experiencing better-than-expected growth. Our medical, industrial and instrumentation and automotive end markets also have outperformed our expectations year-to-date.

With all businesses performing well, we increased our year-end revenue guidance to approximately $4.4 billion. Therefore, the implied fourth quarter expectation should allow us to exit the year at a run rate level that suggests exciting organic growth expectations for the next year. It also means outperforming prior expectations for 2027. As we framed at our Investor Day in May, TTM continues to invest in organic growth opportunities, technological advancements across our product offerings and strategic M&A. To that end, we discussed 3 key strategic directives. First, investment in capacity and innovative technology for advanced interconnect. In this area, we have invested or committed to invest over $1.2 billion in capacity expansion in the 2025 to 2029 time frame. This includes the development and launch of our N+M product for the commercial data center and networking end markets and construction of our Syracuse Diamond facility to provide ultra high density interconnect solutions for our aerospace and defense end markets.

We are also in the early stages of investing in a new innovation center that will be located in Eau Claire, Wisconsin, very close to our existing technology center in Chippewa Falls, Wisconsin. This will be our third research and development facility and will spearhead our identifying R&D activities focused on pioneering technological advancements in areas such as embedded optics, MSAP and passives, among other technologies. Second, geographic expansion into Europe. We announced in June our intention to acquire 2 well-established European companies. Swiss Technology Group and ILFA. To begin with this effort, yes. These transactions are working their way through the required regulatory processes, and we continue to expect this will close late in the third quarter.

Finally, our third strategic directive is investment in what we call up the chain, our vertical product solutions in integrated electronics in line with this directive. We are very excited today to announce the planned acquisition of Epiq Solutions. We are enthusiastic about the established platform positions and the future growth opportunities at Epiq and believe the combination of TTM and Epiq brings a unique set of competencies that we deliver differentiated -- that will deliver differentiated and high-value solutions to all our end markets. I will expand more on the cutting-edge technology and product offerings that Epiq provides in the next section.

But first, I will turn it over to Dan to provide the financial overview of the transaction.

Thank you, Edwin, and good afternoon, everyone. Not only are we excited about the acquisition of Epiq for its fantastic technology, products and customer base, it also strengthens our financial model by adding more high-margin long-cycle business to our mix.

Let me go through the financial highlights for you. We are acquiring Epiq for an all-cash purchase price of $1.1 billion. We will borrow the necessary funds and have received commitment letters from our banking partners at JPMorgan, Bank of America and Barclays. On timing, we expect to close in the fourth quarter of 2026 subject to regulatory approvals and other customary closing conditions. Epiq is experiencing strong revenue growth and margin expansion, and the transaction is expected to be immediately accretive to our adjusted EBITDA margins and expect it to be accretive to our non-GAAP diluted EPS by 2028. On a synergy adjusted basis, we estimate the acquisition to represent a 17.4x multiple on expected 2027 adjusted EBITDA.

Now on the next slide, we have an illustration of the rapid deleveraging that we expect due to strong EBITDA generation and cash flow conversion. At the close of the transaction, we estimate total net leverage of 2.3x, and we expect to reduce this to within the range of 1.5 to 1.7x within 12 to 18 months, putting us right back in our target range of 1.5 to 2x.

Now I'll turn it back to Edwin to further discuss the strategic benefits of combining TTM and Epiq.

Yes. Thank you very much, Dan. Today, TTM has a strong product position in the RF spectrum and components and increasingly at the modules and subsystem levels. which have been built over time, both organically as well through the key enabling acquisitions such as Anaren and Telephonics. Acquiring Epiq means that TTM will be able to gain complete command of the RF spectrum from 2 megahertz all the way up to 40 gigahertz. Through this combination, TTM has the capability across the full RF spectrum across components, modules subsystems and systems, which will all have fundamental applications in communications and other applications.

Communication in military and security, which is more formally referenced as COMINT surveillance, radar, electronic warfare, LEO Space, Missile Defense, GPS, Position, Navigation and Timing. The Epiq portfolio has very little to no redundant overlap with TTM. So the addition is expected to be extremely additive and presents a number of opportunities for driving value-added cross-sell and combined revenue synergies in the spirit of enhancing up the chain progress in our go-to-market model.

To close, 3 takeaways. First, this transaction supports the growth strategy we have been executing against and moves TTM further up the chain. Second, Epiq adds complementary and unique RF and DSP technologies and product offerings. This brings capabilities we do not have today in form factors. We do not build today on programs we are increasingly asked to serve. Third, and importantly, to our shareholders, this transaction enhances the long-term financial model as it is expected to be immediately accretive to adjusted EBITDA margin and expect it to be accretive to non-GAAP diluted EPS during 2028. With that, Olivia, you can now open the call for questions. Thank you.

[Operator Instructions] Our first question coming from the line of Mike Crawford with B. Riley Securities.

Are there any major programs of record that are driving Epiq growth? Or could you talk a little bit about the funding for their various solutions?

Yes. Mike, very good question. And Epiq is a great addition. And if you look, let's say, at the programs, they already support and look at 2027. This is not just one program. This is a set of programs. I think it's over 10 different programs. And it covers already quite a substantial point of the whole funnel. So that's the reason that the forward-looking numbers in 2027 are pretty accurate. And basically, we hope to do even better. So it's not just one program. These are multiple programs with big players, a lot of players we already are engaged with, but also some very new and interesting parties.

Well, Edwin, are you able to name them or not?

At this time -- over time, I can name them. These are the big players, that you're very well aware of but also, let's say, some very unique smaller players and also by the way, some players in Europe. So it helps a lot. But let's say, 45% of the whole Epiq revenue is covered by that of these big players. So it's a really, really well and really well established.

Our next question coming from the line of Jim Ricchiuti with Needham & Company.

I was just wondering, has there been any relationship between Epiq and the Anaren business or with the more recent Telephonics acquisition?

Yes, that's -- and again, a very good question. This is -- these things don't come out of the blue, okay? So we looked at Epiq for the last years, and they're very successful. So I think we looked at the Epiq the first time, I think it was in 2022. And it's always on our wish list. The guys are very, very entrepreneurial. It's a very good fit. Like I said, we do a lot in radar. They do a lot in communication. We do a lot in some other things, let's say, with respect to surveillance. They cover, let's say, the whole communications side, the GPS side, the LEO Space side, Electronic Warfare. So it's so so so complementary. So that's the reason. No, they didn't come out of the blue. This is something we look at since 2022.

And Dan, maybe a question for you. I think you alluded to strong revenue growth. Can you give us a sense of trailing 12-month revenues or so just some way to frame that? And obviously, it sounds like higher margins, and I don't know if you can give us any color on that. And then finally, the $9 million of synergies. Just curious if you could talk to that just given that this is a private company.

Sure. That's multiple questions there, Jim. Let me try to tackle them once at a time and then you can remind me. But frankly, what we wanted to say about the revenues, the expected revenues for 2026 full year are $160 million, and their EBITDA margins are in the mid-30s. So that will be accretive to us. On the run rate synergies, there are some cost synergies expected as well as revenue synergies. So it's kind of a mix of both, even though they're not a public company as we join, obviously, we can add some efficiencies in the back office and what have you as well as with the customer base and the technology, we will have some revenue synergies that add up to that $9 million when you add them together.

And just to address Michael's question a little bit earlier, key programs for Epiq do include items like Rivet Joint, the MQ-9 Reaper and other air-based and air defense radar systems as well as applications.

Congrats.

Our next question in queue coming from the line of Steven Fox with Fox Advisors.

I had one other financial question and a bigger picture question. So to get to the 28% EPS accretion that you're targeting, can you give us a sense for what kind of sales growth you're expecting? And I guess whether there's any organic margin improvement? Or do we assume the margins expand because of the synergies you mentioned? And then I had a follow-up.

There's a little bit of both. There is some margin -- some organic margin improvement. They've won some very strong current platform programs that will increase their margins. And for -- as far as annual revenue growth, it is in the double digits, somewhat a little bit higher than what our A&D growth rate is right now.

Great. That's helpful. And then it's still early days, I get that. But like from a sales synergy standpoint, how much more color can you provide on how that comes about where 1 plus 1 equals 3 at a certain customer? And is it more them leveraging your relationships or vice versa? How would you sort of just talk about sales synergies?

Steve, let me try and then hand it over to Dan. I think I'm a very realistic guy. I'm already -- I love it when 1 plus 1 is 2.1, let's say. That again, our team is hoping for 5. So just to let you know. If I look at all these programs, and I have all these key customers here in front of me, a lot of these customers, we are already engaged with. Now with Epiq, we can provide a complete portfolio, yes. And on top of that, let's say, this is just not just RF plus DSP. This is a lot more. So with all these new capabilities, I'm sure I'm 100% sure we get far more synergies over time. This will not be day 1, absolutely not day 1. But over the coming months, we will align our sales forces. We will align our offerings to each of these big players, and they're all big players. These are L3Harris, these are the RTX, big guys. And same thing in Europe.

So I expect a lot more synergy. It's a very strategic buy for us. But I can tell you, these sales forces are already aligned, and this will go very, very smooth.

I'll also mention -- Steve, I'll just also mention that synergies will come from -- there's very little program overlap as well as limited customer overlap in our top 10 versus their top 10. So expansion to new customers and new platforms.

Our next question coming from the line of William Stein with Truist Securities.

And first, let me say congrats on this acquisition. It looks like a very interesting new or extending the direction of the company, as you've highlighted. But first, Edwin, can you talk about the relationship between the 2 companies prior to this evaluation of the acquisition. Was Epiq a supplier to TTM or was TTM a supplier to Epiq? And if so, maybe you can talk about that a little bit? And can you also talk about how TTM's ownership of this asset will allow it to grow faster or become more profitable than it would have done on its own or in someone else's hands? What's special that the TTM will provide here?

Yes. Happy to do that. Happy to do that. Before I do that, maybe let me also step back a bit and look at the overall strategy. And there is one slide, let's say, in our deck, showing that. Remember that we are following that wave on data centers and networking, and we are following that we're steering that wave. And at the same time, we're building out these businesses, both organically and, let's say, with staff functions showing these acquisitions. So it's important to keep that in mind. By the way, we will not step away at all from data centers and networking. We will invest and we will invest more if the markets ask for that. We have to leverage. We will continue to do that. That's very important to know. We're very committed to all these 8 end markets.

So where A&D is just one end market, but a very interesting one because over time, this will be a very important thing for us. So having said that, the relation between Epiq and TTM, yes, there were some relations. As you know, the RF domain, everybody knows each other. So did we have a strong relation in supplier customer? No, no. This is all, let's say, new business starting that also helps, by the way, in synergy. But we knew each other very, very well. And like I said, this doesn't came out of the blue. It started in 2022. And we took our time to look at the company. We engage with a company.

There were a lot of management discussions with the company. The CEO and his staff are really, really well established. And indeed like you said, we can give some volume. We can give, let's say, a bit more capital. We can give a bit more volume in our facilities to grow. We have a bit more R&D expertise in other domains, in other end markets where we can help. So it will be -- there will be a lot of synergy there.

Yes. We have very little supply into them, but we do provide PCBs to some level with the combination of the 2 companies, we can obviously leverage that our design and manufacturing the ability of -- for PCBs to then vertically integrated into their products. So that will be a win-win for both of us. Also want to comment -- or correct the comment I made earlier. I said their revenues were $160 million in '26, I think, and that was the '27 number. So as we look forward.

If I can ask a quick follow-up. Edwin, I understand the way you frame this acquisition, and it's very consistent with what you talked about at the Analyst Day. And on Slide 4, you show the sort of step function increase in the company's capabilities from Epiq. And there's another one drawn out in the future. I'm sure that's mostly stylistic, but I think it's worth giving a some discussion to this, whether following the 2 smaller deals you announced a few weeks ago and this larger one today, should investors expect additional deals of this size -- of the size of the deal you're doing today, it's sometime in the next year or so? Or maybe you could just help us understand the sizing and timing of potential acquisitions from here now that you've done a couple of small ones in this somewhat bigger one.

Yes, we did a few small ones. And indeed, there are a few small ones to follow up. This is a bigger one and indeed a very strategic one. the drawing indeed, as you see, there is no time access. So it can be further out. But if you look at our leverage, we have the capabilities to do more. But again, very well balanced with our internal investments, let's say, in our capacity for data centers and networking which is also booming. So we balance it in that way. At the moment, we don't have a clear view on another acquisition this size. Of course, we always have a list of, let's say, 10 to 50 companies we follow very carefully, and there might be good opportunities at any point in time. But at the moment, we are looking, let's say, in securing these smaller acquisitions we announced, maybe do a few extra in Europe and then looking at -- to integrate this Epiq acquisition in a good way and grow it organically. But again, we keep our eyes open, and we monitor it every day on what else we can do.

Our next question in queue coming from the line of Ruben Roy with Stifel.

Edwin, you mentioned RTX, L3Harris, I think some of those companies buy some components and modules from TTM today. And when you move up into systems with Epiq, I'm just wondering, are there competitive dynamics there with some of those existing customers? Or am I -- is it different the way you're kind of approaching that customer with Epiq?

No, that's a good question. No, absolutely. This is all very well managed. And I can tell you, I'm very much engaged with all these customers. They love it when we solve difficult things for them. And some of the things, yes, they do themselves, but not at the right scale and not with -- sometimes we thought with the right expertise. So being, let's say, the RF competence center with and including the DSP, we solve a lot for them. And it's always -- with all these big guys, it's always a make-or-buy solution, but the capabilities are really, really outperforming some of the things they like to do themselves. So I'm not worried at all, yes.

Of course, we had several customer calls on this, and it's part of our due diligence, of course. And we also have relations with these customers. So they love it. In general, they love it. If we do these type of things for them, that means they can concentrate more on the overall system architecture, the user interfacing and all these type of things.

Right. Okay. That makes a lot of sense. Just a quick follow-up. On Slide 7, Edwin, so now you can address the full frequency spectrum and you've got TTM inside of that band. Is there a way to think about what the expanded TAM opportunity is here across the entire spectrum range?

And that basically comes to -- I know it's big, yes. But that basically comes back to, let's say, the overall strategic planning we are doing right now, and I mentioned it on the earnings call, this is the period where we do our strategic planning. This is where we look at our SAM, TAM and our market shares in each of our businesses. So we will do this exercise. It will be big. It will open up a lot of opportunities. But I'd like to get -- let's say I'd like to get the Epiq management team, of course, John as the CEO to get involved in these discussions to come with some accurate numbers. But I can tell you the opportunities are big.

I say that probably expands our SAM more than the TAM, it provides us in partnership with them more opportunities within our technology.

And we have a question from Jim Ricchiuti with Needham & Company.

It sounds like they've had some nice wins. I'm not sure if you can give us any color as to what their backlog might look like? And then I had one quick follow-up.

The question was about backlog, correct?

Yes. I'm sorry, Edwin, if you didn't hear me, I was just curious, it sounds like they've had some good wins. So backlog...

May be better than backlog. It's -- if you look at '27 and you mentioned -- Dan mentioned the number, let's say, which we are going after the $160 million. It's very nice to see that these top 10 programs are basically comprising already 45% of total revenue. That means that this is very, very much secured. If I look at the overall numbers for '26 and '27, a lot of things are already secured. So without giving you an exact number because I don't have the exact number here.

I can tell you that the coverage is already pretty healthy. And again, that made us use, let's say, the 2027 number. Instead of, let's say, looking back 12 months, we said, okay, this is a nicely growing business, very much secured with these big guys, these big programs, which will normally not move. And by the way, they don't lose any business to competition, any business to competition. The only thing what we took out of their forecast and look at our own forecast is basically programs which might move to the right. So if I take that into account, I'm very confident about '26 and even about '27 on these programs. So the backlog is very, very healthy.

Got it. What does the customer concentration look like? It sounds like there might be a fair amount of customer concentration with that kind of revenue base and given the programs.

Yes. So if you look at the customers, and we mentioned a few. It's like the L3Harris of this world, the BAE systems, the Roke, RTX, a lot of Army programs and also special operations program, by the way, where swap is extremely important. Then you see that these top 10 customers are covering, let's say, 40%, 45%, okay? That means that the other customers is basically the tail. And it's interesting to see that in that tail, there are a lot of European customers as well. So working in our strategy to get to do more in Europe. So a very, very healthy distribution, not, let's say, one customer, which is very, very dominant, not at all. Looking at the top 10, a very nice distribution.

Jim, let me jump in, too. So as Edwin mentioned, about 40% to 45% representation in their top 10 customers. Only one of those customers is over 10% of revenue. So we don't think there's a lot of customer concentration. In regards to backlog, their backlog currently is about $50 million. One of their strengths is their ability to quickly get from design inception to market. And so they don't carry a lot of backlog but they're -- because of their ability to go from design to manufacturing to sale pretty quickly.

I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Edwin Roks for any closing comments.

Yes. Thank you very much. No. Like I said, this is a fantastic opportunity for TTM. And of course, the rest of the day, we will spend a lot of time to getting -- making sure that we welcome our new colleagues. And I'm sure that the combination of TTM, Epiq will be a very, very, very strong position here. So thank you very much for this call, and talk to you later. Bye.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Hello, and welcome to TTM Technologies Second Quarter 2026 Earnings Conference Call. Please note that this call is being recorded. I will now hand the call over to Sean Hannan, Vice President of Investor Relations at TTM. Mr. Hannan, please go ahead.

Greetings, everyone. Welcome, and thank you for joining us today. I'm Sean Hannan, Vice President of Investor Relations for TTM. With me on the call are Edwin Roks, our President and Chief Executive Officer; and Dan Boehle, our Executive Vice President and Chief Financial Officer.

Before we get started, I'd like to remind everybody that today's 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 one or more risks and uncertainties, including the risk factors we provided 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.

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 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. Here is Edwin.

Thank you, Sean. Good afternoon, everyone, and thank you for joining us for our second quarter 2026 conference call. At TTM Technologies, we are focused on designing and manufacturing complex advanced interconnect products and printed circuit boards in addition to what we term up as up-to-chain products and solutions such as sophisticated RF modules, intricate subsystems and fully integrated mission systems. Core to the design of all our products and solutions as well as the key strategy to our business is innovative focus to satisfy next-generation needs for our customers and end markets, particularly regarding swap or size, weight and power.

We believe the future of [indiscernible] lies in speed to market, high reliability and efficient technology integration and we consequently engaged early with our customers to ensure this alignment while also enabling optimal management of their complex supply chains. From a demand standpoint, we remain excited about the key mega trends of artificial intelligence and inference, which have been strong drivers of our performance and new business activity at TTM. We previously stated that approximately 80% of our net sales are related to these two megatrends, and we believe this will continue to put us in a beneficial position for our investors for the foreseeable future.

We remain committed to [ transform ] capital and resource investments at our facilities around the globe to take full advantage of these opportunities. And we also plan to continue the pursuit of opportunities that enhance our business and financial strength with additive products, capabilities and geographic offerings through thoughtful strategic acquisitions.

We are tracking well ahead of our previously communicated plan to achieve at least $4 billion in net sales in 2026 and our earnings for 2026 are exceeding our prior expectations as well as Dan will share [indiscernible] in his comments. With the continued strong demand involves artificial intelligence and defense, we also remain confident in our ability to achieve 15% to 20% organic revenue growth for 2027 and 2028 as previously shared. We will also provide further clarity on these out years next quarter as we develop our updated long-term plan.

In our Commercial segments, we are highly focused on supporting the demand wave of artificial intelligence in the Data Center and Networking end markets. In this market, technology demand has been robust across our diverse set of customers, and we are particularly excited for our growth momentum as we've initiated the early stage of our full production launch of N+M our asymmetrical interconnected circuit boards. We are also focused on evolving opportunities in the use of automation and AI in our Medical Industrial and Instrumentation end markets, while we remain strategically positioned in Automotive for longer-term advanced technology cycles.

In our Aerospace and Defense end market, we continue to excel with our leading position in advanced interconnect products as we work to expand our product offerings in integrated electronics and [ up-the-chain solutions ]. We remain quite encouraged by our opportunities, and we are very actively working to secure additional future awards or orders for the Golden Done program, multiple munition programs and in emerging technologies and companies.

In the third quarter, we will begin the initial stages of ramping up volume for Ultra-HDI products at our new Syracuse facility. This plant is expected to continue into the fourth quarter and throughout 2027 to reach full capacity run rate at 2028.

Operationally, in A&D, we are also very pleased with our progress on targeted initiatives to implement better pricing expenses, streamline our supply chain and drive manufacturing efficiencies which should all enable margin improvements in the long run. Towards the end of the second quarter, we announced our intentions to acquire 2 well-established companies in Europe which are privately held Swiss Technology Group AG, or STG in Switzerland and ILFA GmbH in Germany. [ This ] transaction is expected to close in the third quarter. From a model standpoint, these businesses are expected to contribute less than $0.05 of incremental sales and will be moderately accretive on an adjusted EBITDA basis.

But most importantly, these strategic acquisitions will establish our initial footprint in Europe, adding healthy long-cycle businesses, primarily into Medical and A&D end markets with strategic technology capabilities that reinforce our up the chain value-add technology approach. This will serve as a first step toward our long-term vision to become a significant competitor in this [indiscernible] and we expect to continue to be opportunistic in the future for businesses that simulates such criteria.

I'll now begin with an overview of our business highlights from the quarter. Dan will follow up with a summary of our Q2 2026 financial performance and our Q3 2026 fiscal guidance. We will then open the call to your questions.

We delivered an excellent second quarter of 2026. And as always, I would like to thank our employees for delivering these results. We achieved sales of $1 billion, our first quarterly result reaching that thresholds, and non-GAAP EPS of $0.99 per diluted share, both above our guidance and both all-time quarterly highs. Sales grew 37% year-on-year reflecting continued demand strength in our Data Center and Networking end markets driven by the requirements of AI while our Medical, Industrial and Instrumentation and Aerospace and Defense end markets also experienced very strong growth.

The company's adjusted EBITDA margin was 16.6% in the second quarter of 2026, up 160 basis points year-on-year and 90 basis points sequentially, largely reflecting positive mix impacts. Non-GAAP EPS of $0.99 per diluted share was a 71% improvement year-on-year. The Aerospace and Defense end market represented 37% of second quarter 2026 sales. Sales in the Aerospace and Defense market grew 14% year-on-year in the second quarter while the vast majority of our facilities performing at very strong levels. The sales growth in the Defense market continues to be a 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 longer-term growth is also very encouraging. We have many product innovation initiatives on track within our internal road maps, including unique advancements in printed circuit board technologies for materials that enable high frequency in support of all our applications.

During the second quarter of 2026, we booked significantly Aerospace and Defense business related to APS-153, Multimode Maritime Surveillance Data, the ATP Sensor System for targeting and surveillance, Golden Dome and a number of projected priority respective programs. A&D book-to-bill was 1.3 for the quarter, which led to a total [indiscernible] backlog of $1.7 billion, up from $1.5 billion a year ago. We are also pleased to share that business proposals for this end market are at an all-time high with over $7 billion of potential business currently qualified in our strategic pipeline.

For the third quarter of 2026, we expect this end market to represent 32% of our total sales and continue delivering both year-on-year and sequential growth. For the full year 2026, we now expect sales in this end market to grow in the low to mid-teens year-on-year.

Sales in the Data Center and Networking end markets represented 40% of our second quarter 2026 sales. This end market experienced 91% year-on-year growth in the second quarter, above our growth expectations and reflecting continued demand strength from our data center and networking customers, building out the AI data centers. For the third quarter of 2026, we expect this end market to represent 49% of net sales as early stages begin for the planned ramp up to volume production of our N+M Asymmetrical Printed Circuit Boards. For the full year 2026, we now expect sales in this end market to more than double year-on-year.

The Medical, Industrial and Instrumentation end markets represented 50% of our second quarter 2026 sales. This end market saw a year-on-year growth of 33% during the second quarter primarily aided by healthy demand in Medical, which is included support for major [indiscernible] monitoring products and Instrumentation for automated test equipment supporting AI solutions. Year-to-date, TTM's top 5 medical customers' performance have more than doubled our internal expectations, and we expect growth in this submarket to continue to be driven by demand of innovative products such as surgical robots, [indiscernible] physiology and continuous glucose measuring solutions.

For the third quarter of 2026, we expect the Medical, Industrial And instrumentation end market to represent 13% of total sales, growing both sequentially and year-on-year. For the full year 2026, we now expect sales in this end market to grow 35% to 40% year-on-year.

Automotive sales represented 8% of second quarter 2026 sales and was down marginally year-on-year. We continue to be very selective in this market to focus on higher value-add products that carry margin profiles consistent with our financial goals as we also believe long-term business cycles should migrate back towards our advanced capabilities. For the third quarter of 2026, we expect that Automotive market to represent about 6% of total sales, which reflects slight pressure in supply chain materials availability as CCL producers attempts to shift away from lower complexity materials towards higher complexity products. Given this dynamic, we are actively working with our supply chain products to secure adequate supply that is in line with our customer demand.

For the full year 2026, we continue to expect sales in this end market to decrease in the mid-single digits year-on-year.

The overall book-to-bill was 1.49 for the second quarter of 2026, with the Commercial reporting segment at 1.63 and the A&D reporting segment at 1.3. At the end of the second quarter of 2016, the 90 days backlog, which is subject to cancellations, was $901 million compared to $497 million a year ago, an 81% increase year-on-year. Now Dan will summarize our financial performance for the second quarter. Dan?

Thanks, Edwin, and good afternoon, everyone. I will review our financial results for the second 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 second quarter of 2026 net sales were $1.0 billion compared to $731 million in the second quarter of 2025. The 37% year-over-year increase was due to continued strong growth in our data center and networking, medical, industrial and instrumentation and aerospace and defense end markets, partially offset by a more modest than anticipated decline in our automotive end market. GAAP operating income for the second quarter of 2026 was $109.1 million compared to GAAP operating income for the second quarter of 2025 of $61.8 million. During the second quarter, we also recognized a noncash pretax unrealized loss in the amount of $14 million from changes in the fair value of a deal contingent cross-currency swap we entered into in order to economically hedge the Swiss franc-denominated purchase price of the pending STG acquisition. We could not use hedge accounting since the deal had not yet closed. Therefore, changes in the fair value of the swap were required to be recognized in our GAAP earnings.

On a GAAP basis, net income in the second quarter of 2026 was $83 million or $0.77 per diluted share. This compares to GAAP net income for the second quarter of 2025 of $41.5 million or $0.40 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 comparison with expectations and prior periods.

Gross margin in the second quarter of 2026 was 21.9%, an increase of 100 basis points from 20.9% in the second quarter of 2025. 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. Selling and marketing expense was $24.2 million in the second quarter of 2026 or 2.4% of net sales versus $20.3 million or 2.8% of net sales a year ago. Second quarter general and administrative expense was $49.3 million or 4.9% of net sales compared to $44.3 million or 6.1% of net sales a year ago.

Our operating margin in the second quarter of 2026 was 13.8%, a 270 basis point improvement from 11.1% 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. Interest expense was $9.9 million in the second quarter of 2026 compared to $10.6 million in the same quarter last year. Interest income was $1.9 million in the second quarter of 2026 compared to $2.2 million in the same quarter last year. Realized foreign exchange and other nonoperating income and expenses in the second quarter of 2026 totaled a net expense of $4.7 million as compared to net expense of $1.6 million in the same quarter last year. The increased expense was driven by the weakening of the U.S. dollar which resulted in a $4.9 million foreign exchange loss in the second quarter of 2026 as compared to a $1.4 million loss in the same quarter last year.

Our effective tax rate was 15.0% in the second quarter of 2026, resulting in tax expense of $18.9 million. This compares to an effective tax rate of 15.0% or a tax expense of $10.7 million in the same quarter last year.

Second quarter 2026 non-GAAP net income was $106.9 million or $0.99 per diluted share. This compares to second quarter of 2025 non-GAAP net income of $60.8 million or $0.58 per diluted share. Adjusted EBITDA for the second quarter of 2026 was $166.8 million, or 16.6% of net sales compared with second quarter 2025 adjusted EBITDA of $109.7 million or 15.0% of net sales. Cash flow provided by operating activities was $96.4 million in the second quarter of 2026, which compares to cash flow provided by operating activities of $97.8 million in the same quarter last year. Free cash flow in the second quarter of 2026 was $46.0 million as compared to free cash flow of $37.6 million in the second quarter of last year.

Now we will provide our financial guidance for the third quarter of 2026 and an update to our outlook for the full year 2026. We project net sales for the third quarter of 2026 to be in the range of $1.10 billion to $1.14 billion and non-GAAP earnings to be a range of $1.21 to $1.27 per diluted share. These estimates exclude any contribution or impact from pending acquisitions. In addition, considering the current demand dynamics reflected in our first half results and third quarter guidance, we believe that the net sales growth should continue with a sequential uptick in the fourth quarter. Consequently, we now expect full year 2026 sales of approximately $4.4 billion and non-GAAP earnings to approach $5 per diluted share. These full year 2026 projections also exclude any contribution or impact from pending acquisitions.

The third quarter 2026 non-GAAP diluted EPS forecast is based on a diluted share count of approximately 107.7 million shares, which includes the dilutive effect of outstanding stock options and other stock awards. We expect SG&A expense to be approximately 7% of net sales in the third quarter and R&D expenditures to be approximately 1% of net sales. We expect interest expense of approximately $11.3 million, interest income of approximately $2.5 million and realized foreign exchange and other nonoperating expenses of approximately $5 million. We estimate our effective tax rate to be between 13% and 17%. Further, we expect depreciation expense of approximately $33.5 million, amortization of intangibles of approximately $9.2 million, stock-based compensation expense of approximately $18.8 million and noncash interest expense of approximately $0.7 million.

And finally, I'd like to announce that we will be participating in the Jefferies Semiconductor Conference in Chicago on August 26, The Jefferies Industrial Conference in New York on September 9 and the B. Riley TMT Conference in New York on September 10. That concludes our prepared remarks. So I'll turn it back to you, Justin, for the Q&A session.

[Operator Instructions] And we will take our first question from the line of Jim Ricchiuti from Needham & Company.

First question, I wonder if you can talk a little bit about the impact you may be assuming on revenues and margins from the N+M scale-up in Q3. If you can't provide specific numbers to it, I wonder if you could just speak about the impact qualitatively?

Jim, yes, thank you for being on the call. Happy to start this answer and then hand it over to Dan. First of all, yes, the second half of the year is, of course, a very big thing for us. It will be -- as you know, the Asymmetrical PCBs, the [indiscernible] kick in. So the good thing, Jim, is that we already delivered about tens of millions and yields are looking really, really well. But again, we have to do another about $600 million of that technology, which is a really nice technology. So that will help us in our margins, assuming that the [indiscernible] will stay all the same. So this is a thing to look forward to.

And so Jim, just to give a little bit more color. So Edwin just mentioned $600 million in the second half about 1/3 of that in Q3 and then 2/3 in Q4. So you see that ramp as we ramp production and then improve yields as well in the fourth quarter. So then the margin will kind of improve as well as those yields improve. So it will -- I won't quantify exactly what it will have. It depends upon how quickly we come up to that yield curve. But but it will improve the margins in both the third quarter and fourth quarter.

And of course, Jim, this is all building in our guidance for Q3. And since we guided also sort of for the year, you also had the Q4 numbers, correct?

That's our adjusted EBITDA margins.

Right. Okay. I wonder if you could talk to the number of 10% customers you may have had in the quarter. I know that the Q is -- it was just filed. I'm not sure if you disclosed it there, but I wonder if you can help on that score in terms of Defense and the presumably the Data Center area?

Sure, sure. And Jim, I'm always happy that, let's say, these 10% customers, which we disclosed in our 10-Q and 10-K are largely distributed over the 2 reporting segments. So 1 is, let's say, in our Commercial businesses, and one is in our Aerospace and Defense businesses. And I must say, in the Commercial business, it's getting a bit crowded. So there is another one which is getting very close to the 10% customer. So -- so we're in a pretty good spot. It's good to have 10% customers. It's also good to have a good distribution of customers.

As you know, the hyperscalers and the networking guys we have about 10-plus of big, big companies in that field. And of course, you're very much aware on the Defense side, who our customers are, and that's also a nice balance. So again, one I'm happy with these big guys, the 10% customers, nicely balanced over the 2 important segments. We're also very happy with having these [indiscernible] of customer nicely distributed.

Got it. One quick question, and I'll jump back in the queue. It sounds like you're making progress in Penang. Are you pivoting now to producing product for the Data Center market from this facility?

Yes. Yes. I'm extremely happy about Penang, by the way. Penang is doing exactly what we told you guys have a year ago. It's -- we're getting to very decent revenue levels, very close to, let's say, a breakeven number, which we hope to get, let's say, late Q3, Q4. I think we are exactly on track. As I mentioned to you before, we are looking at the yields of some very important lead vehicles for our end customers. These end customers are still the same. We added even a few. So they are very happy. Most of that business in Penang, [indiscernible] is related to our MI&I business. But also, if I talk about N+M, which is one of the most difficult technologies we have in the company, I'm so happy that Penang is also doing N+M and indeed, supporting some of our some of our data center and networking customers. So a good mix, still mostly MI&I, medical instrumentation, industrial, but also some of the data center guys.

[Operator Instructions] And we will take our next question from Steven Fox of Fox Advisors.

I was wondering if you could dig in a little bit more into the sales pipeline you talked about in the aerospace and defense business. Any sort of gauge into how maybe your business either is changing or expanding? And what type of capability trends are you seeing that's needed there that maybe we haven't thought of yet? And then I had a follow-up.

Yes. Thank you, Steve. Good question. As you know, our Aerospace and Defense business is basically splitting into two. It's -- it's our PCB business, which is using the Ultra-HDI, and you saw the opening of Syracuse Diamond, which it really good and so helping us on our Ultra-HDI. The other part of the business, let's say, everything we do up-the-chain. So using our interconnect technologies to making modules, mostly RF modules, subsystems and systems, even complete radar systems. So that business is very balanced. The business is doing very well on the PCB side, but also very, very well on the interconnect -- sorry, in the electronics side. So that's going well on both ends.

If you look at the customers, let's say, they're very active on both sides. So if you look at the book-to-bill, or if you look at the backlog, even better at the $1.7 billion, that's a very solid number. If I look at the pipeline, which we also review, of course, every month, we're getting over the $7 billion. And this is a qualified pipeline. So we see cover nice things happening both on mission side, that's probably the most [indiscernible]. That's mostly on PCBs, by the way. And we see a lot of things happening on the Golden Dome side. That's a good mix between both of the businesses. and then all the other things like communications and other applications. So Steve, a good mix in A&D, well positioned. I was on the Farnborough, a few weeks ago, all these large players, they come with additional demand. And it looks like sometimes we are the only supplier in the U.S. So this is very helpful. And also our international business, by the way, is growing very nicely, and we hope to grow that even further with the announcement of the 2 companies we addressed in our earnings release.

Great. That's very helpful. And then just as a follow-up. I'm sorry if I missed this, but is there any update on the Wisconsin facility ramp and your latest thinking on that?

No, but I can give you an update on the Wisconsin facility. So first of all, Steve, we're not in a rush here. yes. We are -- we always have to plan with Eau Claire. We will start some production there, and we will start an innovation center. Probably the last thing, the innovation center is the most important thing. We will demonstrate the newest technologies very close to Chippewa Falls where even today, I saw some very new milestones. That site is doing amazing. 20 minutes away from that site, we have Eau Claire, we have Wisconsin. So it's very well positioned to do advanced R&D. The other thing, let's say, looking at the Data Centers and Networking customers, they all have the opportunity to step in Eau Claire whenever they want. And of course, we will ask them a contribution there.

But again, we are not in a rush. And they are not in a rush, which I understand. That also means that we have a bit more time also to think about our Aerospace and Defense business. But again, also here, we are not in a rush. The thing is we have the capacity available. We only paid less than $20 million for that site. So again, it's not a burden. So again, we'll take our time.

Our next question comes from the line of Mike Crawford from B. Riley Securities.

I believe in your remarks, you addressed some CCL supply chain issues facing kind of lower end automotive products serving that vertical. But what about supply chain of T glass and other materials needed for your most sophisticated printed circuit board serving the data center vertical. How is that supply chain looking?

Yes. So Mark, there's a [indiscernible] going in that direction, indeed, what you say. It is -- it looks like all the suppliers are a bit more focused on the higher end products, on the high-end materials. So I understand that. They want to make some money there. So they do that. That also means that if we are suffering a bit with our supply chain, it is always in the somewhat lower end parts of our business, yes. So you pick an example here, automotive. Yes, it's not our most important business. We pick our battles there. We look for the higher end, we look for the higher margins. So if we have some supply chain issues with slightly longer lead times, it is in those businesses, protecting basically our higher end. So yes, I see that trend.

Are the customers suffering on that? I don't think so. It's not happening. We still are able to get decent lead times. We still have the materials. But yes, the effect is more severe in the lower end materials than in the higher-end materials.

Edwin. And then switching gears for my one follow-up. I think -- you said that the 2 proposed acquisitions would be less than $220 million. That's even that number is a bit higher than we estimated in our preview, but could you give any more firm economics over potential annualized revenue contribution once that close what you're paying and also ability to expand in the footholds that you're gaining in Europe like whether within the existing facilities or adjacent to as you've done in Syracuse and elsewhere?

Yes. Michael, let me cover this first and then hand it over to Dan. So first of all, I cannot be more excited about these 2 companies. I was there just a few weeks ago, this will be a great, great addition to TTM, okay?

If I both look at ILFA, I met the General Manager by the way A&D the CEO at the Farnborough show [indiscernible] was already helping us with a lot of TTM stuff. So that's great. And also STG, I would almost feel that they are already part of TTM. So -- but still, we are in a quiet period. We still have the regulatory offices to put their guidance, and we wait for that. And that hopefully, they will conclude September or so and come with a good conclusion there. The only thing I can say, and I said it in the -- we said it in the press release that it is less than 5% and are happy with that because that also makes it for regulatory offices a bit more easy. I wish I could talk more about revenue. I wish I could talk more about what we paid for it or what we will pay for it, but I'm under [indiscernible], I cannot do that, Mike, unfortunately.

But I can tell you, I'm very, very excited. And Dan, if you want to add something there?

Nothing more to add. We do expect them to close in the third quarter, and we'll provide all the related information at that time, including the impacts that it will have going forward.

Our next question comes from the line of William Stein from Truist Securities.

First, I want to say congrats on the good results, a better outlook and a very strong implied Q4, which I think is what's giving the stock the relief now. So again, congrats on that. I'd like to ask about N+M again a little bit and maybe a couple of questions about it. First, it would seem to me that this is the major contributor to the upside in Q4, Edwin, I think you talked about doing an incremental $1 billion of N+M revenue next year. So I'm hoping you can comment whether I have that data point correct. And whether there's a need for this technology outside of data center? And maybe you can talk us through why and what the expected impact would be on your margins?

Yes. Yes. Sure, Will. First of all, we are extremely happy with N+M, not only with N+M but also what it opens up. N+M is not just one process. It's a family of different options. And this is only the first step. So I'm extremely happy with that. It supports multiple customers. And again, not only data centers and networking customers, but all other customers as well. So new opportunities are opening up, which is great. Second thing is, yes, we are delivering now N+M., yields are much better than we thought. And again, this is just ramping up. So this is great. Yes, we're planning to do a lot of business next year as well. What that exact number is, Will, is still a bit of work, let's say, a work in progress. We're sort of doing our planning for next year. We're still doing our strategic plan.

By the way, our strategic plan goes out 7 years, okay? And our business plan is the first year of that. So we're doing all these analysis to make sure that we are more accurate. You see that we are getting far more transparent to our analysts than we ever were, yes. So we give the guidance, of course, we give guidance on the quarter and also the EPS, but we're also adding now the full year, yes. This is the first year that we give guidance on the full year. And also since this quarter, you give guidance on the full year EPS. We plan to do that next year as well. So as soon as we did our insights, and this basically -- this is a bottom-up exercise, not only top down, working with all our customers seeing how much they need on N+M and how much they need on other technologies, we get back to you with a very, very accurate number, I would say, but I can tell you, well, N+M is really, really important for us. And it could [indiscernible] you mentioned.

Great. As a follow-up, maybe I can ask about capacity constraints. I think the last time we spoke, you said that you're not facing any in data center, but if you had any additional capacity, you'd love it in the MI&I, is that still the case? Or are have capacity additions allowed you to overcome those constraints? Or are they still affecting you and maybe compare this to what your customers are seeing broadly in the industry?

Good question, Will. The thing is the thing is -- and even, let's say, with the growth quarter-over-quarter -- so the year-over-year growth in MI&I is 33% even with those growth numbers, we're still able to supply these customers. If we look at the whole capacity calculations, mostly China, China plus one, but also U.S. we still are very, very comfortable. You see that we do -- we focus a lot on brownfield. That basically means existing facilities, which we are going to expand. We do that very well in China. During the Analyst Day, I remember we gave you a few examples how fast these things go. Remember in March was an empty hall, and in May, we have all these drill stations there. So that's how fast we can move in China, and that's still happening.

By the way, I just came from my Board meeting last week, and we approved another capital investment on the same thing. So that's going very well. On MI&I, that business is growing. We love it. That's also the reason for the acquisition of STG, by the way. We love that business, the medical business when you're in, you're in. And the same thing Will on the A&D side. There we are also expanding Sterling. We're expanding a lot of other sites where -- which are really relevant sites and suddenly you make from $100 million site, you make a $200 million site. That's how it works. So I like that brownfield, and I like the expansion of existing sites, and that's helping us a lot. And that's the capacity is available immediately. So this is the way forward.

And Will, I'll just point out, just as Edwin just mentioned, we got approval to accelerate some of our capital expenditures. So if you look at the 10-Q disclosure, it will -- you'll see the expenditures expected for this year went up around $45 million at the top and bottom end of that range.

Seeing as there are no more further questions in the queue, I will turn the call back to our President and CEO, Edwin Roks, for closing remarks. Mr. Roks, please go ahead.

Yes. Thank you, Justin. I'd like to close by summarizing three key items. First, we are experiencing high healthy growth. We delivered strong sales growth in Q2 of 37% year-on-year, resulting in an all-time high of $1 billion for quarterly revenue, driven by increases in our Data Center Networking, Medical, Industrial and Instrumentation, Aerospace and Defense end markets. Second, our adjusted EBITDA for the second quarter of 16.6%, reflecting strong operating performance, leading to another all-time high record and quarterly non-GAAP EPS of $0.99. We expect to continue building on this operating performance in the second half of 2026. And third, we continue to generate solid cash flows from operations which enables us to invest in our projected continued growth while maintaining a healthy net leverage ratio of 0.9x.

In closing, as always, I would like to thank our employees of TTM, our customers, our suppliers and our shareholders for your continued support. Thank you very much, and goodbye.

Ladies and gentlemen, this concludes our conference call today. Hope you have a great rest of the week. You may now disconnect.

Good morning, everybody. Packed room. Good to see. It's been a long time since I was actually sitting on your side of the equation, and I'm now thrilled to be part of a really terrific team here at TTM Technologies. My name is Sean Hannan. I'm the Vice President of Investor Relations here. Very excited to kick off this day. We've got a lot of great presentations. A couple of quick housekeeping things. So our restrooms for people that don't know right behind this corridor here. All right. We're going to have 3 presentations. We're going to have a break and we're going to add another 3 presentations, and Edwin will close with a couple of quick comments. And then we'll have some lunch. And hopefully, a number of you will be able to join us for that.

Now if we can kick to the agenda here. Yes. Thank you. It's a good point. So first thing, just to call out our disclaimers. For those that have not read them, please reference on our website. www.ttm.com. For our overview today, here's how we're going to walk through the presentation. So first, what we're going to do is we're going to have an introductory presentation from Edwin, who is Edwin Roks, our President and Chief Executive Officer. He'll talk through the overall company strategy, where are we going.

Our second presentation is going to come from Catherine Gridley. Now, some of you might ask why did I just put on these sunglasses that might look a little bit goofy at the moment. And here's the reason. We're starting off with aerospace and defense today to talk about first because most of our audience here and a lot of our shareholders are either technology or generalists. And -- we all go through life. We have our own lens of learning things of how we think about things. And I'm going to encourage you to take off the sunglasses look at a different lens as we look at our business because we have this fantastic aerospace and defense business that we really want to underscore here.

Following Cathie will be Greg Fortier, who's also part of our aerospace and defense business, then we'll have our break. We'll move on. We'll talk within our commercial business that will be led by Doug Soder, who's here in our audience somewhere, there's Doug. And then following Doug will be Rob Farrell, who heads up our data center networking business. This gets to a lot of the themes that people tend to focus on being AI, et cetera.

And of course, concluding with presentations, will be our EVP and Chief Financial Officer; Dan Boehle, who's up here to my right, your left. So that being said, thanks again, everybody, for joining us. And let me see if I can hand over the microphone to Edwin Roks, our President and Chief Executive Officer. Thanks very much, everybody.

Thank you, Sean. And yes, good to see a lot of familiar phases, also new faces great. Welcome at our Analyst Day, our Investor Day. And I think it's a good opportunity for you, not to just see Sean and Dan and myself, which you see all the time. but also have a chance to speak with the business leaders. And by the way, the full executive team is here. So hopefully, it will be a good discussion going forward.

So yes, happy to give you an update on where we are with the company this year. But before I do that, let me introduce our new logo. So we thought it was time for a refreshment here going from the 90s to the 20s. And again, the logo that work out for the last decade, but I thought the refreshment will be helpful. So you still we still have the us, but the [indiscernible] now going up, and that's where we are going. So not only, let's say, that we need sunglasses for -- because the sun is shining for us but also, let's say, the Sushis going up. So that's a good story. We like the new logo. You see we have the TTM Technologies. We also have the single T, which is an interesting way to present us.

If I look at TTM at a glance, and again, all of you -- and including me, by the way, we like to look forward. But still, I'd like to show where we were at the end of 2025. So first of all, we are a technology company. We are a high-tech company. We are a global sensing interconnect and decision support company. And you see that in all the presentations we gave in this morning. We're capitalizing on megatrends. And that's AI and defense in our case. So 80% of our business is basically driven by these by these megatrends. And again, AI is not just data centers and networking, AI is everywhere [indiscernible].

Then a very balanced portfolio with highly engineered products. We love things which are difficult. -- we can do it, and we're pretty unique in these things. But again, it's very balanced. If you look at the end markets, and I'll show you later on. And if you look at the products, it's a very balanced portfolio. It all starts with a good understanding of your end markets. If you don't understand your end markets, forget it. In our case, these are 6 end markets, the data center networking, A&D medical, industrial instrumentation should be in that as well and automotive.

And then last but not least, and it's very important for investors. Yes, we have a proven track record and a consistent performance. And that's what you hope to see in the foreseeable future. If I look at the metrics of the end of 2025, we closed 2025 at $2.9 billion of revenue, 19,000 employees and about 25 facilities. So a nice footprint.

If you look at our reporting segments, we report in 2 segments: our aerospace and defense, which is 46% of our revenue in 2025. and our commercial business, which is 54%. And then if you look at the individual businesses, our defense, we don't carve out, but if you look at the fence, -- we have, of course, the defense portion, we have the aerospace and man portion, and we have the space portion, which is growing very nicely, by the way.

If you look at the outpace and defense, the growth is high single digits for that that business. And that's how we predict in the foreseeable future, high single digit. If you look at the commercial business, data center and networking, you will see this year that we likely are going to double that business. That's why you see the 2 arrows going up -- it's a very, very nice business. And we're riding the wave, let's say, and we're steering the wave, and I will show you later on, but that's what we expect there.

Then our medical, industrial and instrumentation business we expect to grow about 25% to 30% going forward. And then our automotive business, where we are very, very picky on what we do. We picked a higher-margin business in automotive -- we will not do the boards of 6 layers or the 4 layers that we do the ADAS systems and so on, where we make our margin. So that business, although in Q1 was almost flat, just minus 2%. We expect decline of, let's say, a 10% year-over-year. So that's where we are. That's where we were in '25. Again, the $2.9 billion is a nice number, but you see better numbers at the end of this presentation.

Our strategy is pretty simple, easy to explain. It goes in 2 directions. First of all, the interconnect solutions. If you think about chips as being the brains and knowing that Moore's Law is getting to an end. So every 2 years, a doubling of the amount of transistors is not happening anymore. You have -- you don't have a lot of choices. You basically -- you have to combine these chips. You have to combine the brains. And that's exactly what we do. We are the nervous system. We consider ourselves a nervous system. We connect the brands to make a very small, efficient and power efficient solution. So consider us the nervous system. And that's what we do with, let's say, our printed circuit boards, where we go up and Doug will talk more about that, but we go up to, let's say, 150 layers. That's not trivial, yes. These are not the layers, let's say I grew up it with 4 layers of 6 layers. Now these are 150 layers.

Substrates and netoposers, very close to the semiconductor technology and heterogeneous packaging. So these are the things we do in interconnect solutions. And that's a big, big part of our business. And then making use of these interconnect solutions, we make our integrated products. So in this case, printed circuit both assemblies and not the straightforward assemblies, not met components. No, these are very special components so that we add more value to our customers and make more margin there.

Our integrated modules, our subsystems and sometimes included with cooling and power and then going to full system architectures where we make full radar systems, for instance. And at the bottom of this slide, you see the -- you see a lineup of different solutions. So the PCBAs, the modules, the assembly and then finally, a full integration in the nose [indiscernible].

Thinking about our end markets, and I will not go in all the details of this slide that we've done in the different presentations. But if you look at data centers and networking, we do a lot in data centers. we don't do only the switching. We do most of the boards in data centers. We have content there. So that's a very, very healthy business for us. The medical business, one good example is surgical robotics. There's a lot of robotics happening. You will also see today an example of glucose measurement, these type of things. That's where you see our solutions.

Industrial. Industrial is also about factory automation. It's a lot about, let's say, robotics as well. So that's happening there. Instrumentation, think about semiconductor test, also a lot of AI-driven businesses. Then on the defense side, Unmanned Systems, about 50% of our aerospace and defense, which is [indiscernible] related -- so you will see a lot of radar solutions. And then our space business, which is all about radiation hardness and making sure that these things stay alive.

When you go in space, you have to deal with very low, very high temperatures, you have to deal with a lot of radiation. And these components, they should stay alive. So that's a thing there. So satellite communication, missile defense, a lot of these type of applications. And then last but not least, automotive. You saw we never stepped away from automotive. It has a lot of synergy with robotics. ADAS is still a very interesting business. So these are our end markets, 8 end markets. And of course, there are a lot of adjacencies as well.

Then the wave, and again, if Dan and I do these investor meetings, we already get that -- we always have to mimic this thing. Now we have it on the slide. It makes it a lot easier. This is the wave we're driving. I would not say we just writing. No, we're driving that wave, correct? It's data centers and networking and you have to be in it, yes. If you want to grow, you have to be in it. But at the same time, I'm so happy that the underlying businesses are also nice, nicely growing. And you see some step-ups also in that line below it. And these are the acquisitions. So we have some very nice acquisitions lined up. We will grow that business in multiple directions.

Again, Aerospace, sorry, artificial intelligence, let's say, driving that wave, but then the underlying business is very, very important, gives us the stability, because the wave will go down. When it to go down, we don't know. Yes, you can read any report and they will give different answers, but it will go down. And we don't want to rely on that. We just want to make sure that we have a buffer to make sure we keep growing.

I know you're not interested in this, looking back, but -- and I know that well, by the way, but still do it. This is showing the 90% year-over-year growth from 24 to 25, which is nicely in line with basically what we said before in January, the 15% to 20% over the coming 3 years that's still accurate, 90% growth, $2.9 billion. But again, '26 will be a lot better. And then looking at the earnings, the same thing. We don't like to look back, but it's still a pretty good trajectory. And here, we said basically that in '27, we will double the $2.46. And that's -- we're well on track and that you will see later, let's say, in [indiscernible] slides.

Then this pendulum. And again, this is not to bring you into a sleepy mode. But this is basically explaining what we do regarding capital resource deployment. You have to do all these 3 things. It was very difficult, by the way, to make that pendulum going in 3 directions, but please consider that is going in 3 directions, okay? So first of all, the organic growth. Organic growth has to do with new technologies. We have to make sure we can keep interesting technologies and work very, very close with our customers, and that's what we do. We have very close relations.

We don't listen to the customers just and say, okay, we do what they want us to do. Of course, we do that, but it's a dialogue. We have a common road map, and these are the relations we have. So new technologies. And the second thing is capacity expansion. And you will see that from a lot of speakers, by the way, beyond the speakers, also our COO, is here, Jim Wallls, and he can talk also to these things. So capacity expansion is a lot of happening there.

Second thing is M&A. We love the chain M&A. We love, let's say, global expansion. You will see some things about Europe. So think about global expansion there. And we love business diversification, again, to make sure we don't rely on 1 business. We are, let's say, mitigated there. And then you have to make sure that you keep the organization simple, you keep it lean. So operational excellence is a key thing. This is not just about yield and about throughput time and all these things. No, it's about having a stable supply chain. -- having, let's say, doing a lot of simplification, think about 80/20 and a lot of simplification, let's say, take our headquarters, yes. A very lean headquarters, a very efficient headquarters.

So -- this is how we operate. Again, the pendulum is going in all these 3 directions every day. Then talking about our footprint. First of all, our headquarters is in Santana. By the way, in the coming months, we will move probably 3 miles and we go to Irvine, but we're still in Santana in Southern California. And then if you look at the global footprint, starting with the U.S. and Canada, by the way, North America. We have 18 sites there and nicely distributed over the country and a very efficient way, let's say, to expand and make sure that we can manage it both on the defense side and the commercial side.

And then looking at our Asia Pacific side we have our 6 sites in China -- sorry, 5 sites in China and the site in Malaysia, which is presented here. And then, of course, what to come -- and you hear my bad accent. I'm originally from Europe, from the Netherlands. So you can imagine that we will be expanding in Europe, and that's going to happen. So that's in the pipeline.

My last slide, I don't want to take too much stuff to your time because I'd like to make sure that you hear from the business unit leaders. As a summary here, we are a very advanced technology leader, and that's how we present ourselves. We want to make sure we're a technology leader. You cannot be -- I don't believe in fast follow us, by the way. You're never a fast follower, you're a follower. In this case, we want to be a leader and we have to be a leader.

We're capitalizing on the mega trends. Like I said, the 80%, and that's a very important thing. The trusted business relationships -- these are big customers we deal with. We have a lot of customers, but also very, very big customers. So we have very, very strong relations, not only for the business now, but in the future. High barriers to entry. We love difficult stuff. We love difficult stuff because nobody else can do it. There are not that many companies who can make 150 layers. There are not that many companies who can do Ampoxin, there are not many companies who can do advanced data systems. It's very difficult.

A global manufacturing footprint is key. Like I said, the diversification is key. We don't rely on 1 business. This is not a session just about data centers and networking. That's why Cathy's directly after me to talk about aerospace and defense, it's a super, super important business for us. We're financially strong and disciplined. If you look at our balance sheet is very healthy. Our leverage is very healthy. We can do a lot of things. And again, our strategy starts with interconnect and then using our interconnect to go into integration, a very simple strategy, easy to understand -- and that's we'll try to keep it that way that everybody understands our strategy.

So with that, let me hand it over to Cathie to talk about Aerospace and Defense.

Thank you, Edwin. Good morning, everybody. Really -- appreciate the opportunity to talk to you today. It's quite a full room. And actually, that's pretty exciting for us. I think. Sure. Apparently, I need to shout. So I will do a bit better job of projecting here. So first of all, let me introduce myself. I am Cathie Gridley, I'm the Executive Vice President and President of our Aerospace and Defense sector. I joined TTM in 2019.

And Today, I'm going to talk to you a bit with an overview on our [indiscernible] sector. I give you a bit of an idea about our strategy for growth and make sure that it's clear to you what our differentiation here is in this market. Also going to introduce Greg [indiscernible] who is going to speak to you and showcase our integrated electronics business. Greg is Senior Vice President and President of our Integrated Electronics business.

So first, let me give you a nice at-a-glance overview of A&D. So this is a nearly $1.5 billion aerospace and defense sector. That puts us in the U.S. around 35 in ranking in terms of A&D businesses and defense businesses in the United States. We are delivering products in A&D across the spectrum of electronics. From the foundation of electronics, which is the printed circuit board and really the foundation of our company. all the way through to mission-critical systems and integration. We do that in radars, surveillance and comms.

But first, I'm going to talk a little bit about the history. How did we get into integrated electronics and it really is core to our Aerospace and Defense business. So in 2018, we acquired Anaren. Interim was that first move as we've evolved from the printed circuit board into integrated electronics. With the Anaren acquisition, we brought RF microwave capability, electronic modules and specialty components.

Wind the clock forward a bit, we get to Telephonics. So we acquired Telefonix in 2022. And with Telefonix, we really moved up the chain further into full system development, design and integration. When we added this, the other thing we added was a significant amount of engineering that allows us to really work more closely with our customers for the integration of our products, all the way from the work that we do on the Board all the way through these modules, specialty components and moving on up into full systems integration. We address 3 markets. So the biggest market, submarket in A&D that we address is defense. So that is about 90% of our portfolio. We have a long history and heritage here. We are on over 480 programs, and I'm going to talk about that in a bit more detail. We also address commercial aerospace. Right now, that is predominantly Boeing and Airbus platforms, but we see that growing into commercial advanced air mobility, so I think air taxi. And Greg is going to talk a little bit more about that opportunity.

And then space. So space is easily the largest growing market that we address. We have had 40 years of putting product into space. We are well respected and trusted for our radiation hardened capability. We have been on pretty much every major space mission. If it goes into space, there's a high probability. TTM is going with it. So Edwin mentioned our 18 facilities in North America. Of those 18, 16 of them are qualified for aerospace and defense product. this footprint and what we do with it is a significant differentiator for TTM. With that footprint, not only are we able to flex and rapidly grow our capacity, which is a critical requirement for defense right now. we also offer a dual source strategy and capability for our customers, especially on national security products.

One of the reasons that this is so important our customers need that supply chain resiliency. And certainly, supply chain is top of mind right now for all of our customers. TTM offers that to them through our footprint. So while other companies are able to provide one location and customers are required to go out and find multiple competitors in order to create that dual source. TTM offers that internally. So we give them that certainty of supply and the ability to flex and ebb as they need us to in order to protect national security requirements.

We have trusted customer relationships, and that is how we are able to get earlier engagement with our customers, get a seat at the table from the beginning as they are designing and developing their platforms. We're able to talk to them at all levels from the printed circuit board all the way up through integration onto the platform because we have that capability. We've invested significantly in the resources, and we have the culture that our customers are looking for from customer relationships.

Our customers regularly refer to us as the benchmark for how to provide support to them and to treat them from a relationship perspective in this industry. And then finally, the makeup of our organization. So from an A&D perspective, we have 2 key areas that we look at from a sort of product orientation. We have interconnect solutions, which is led by Tom Claret, who is in the room, SVP and President of that business; and then Greg Fortier runs our integrated electronics. And I'm going to talk just a little bit more about these 2 pieces of the portfolio. So a little bit of this should look familiar to you.

But before I dive into this chart, I think it's really important for this room to understand when you hear about electronics, especially in the A&D industry, you think about TTM. TTM Technologies is at the root and the foundation. -- of all electronics when it comes to that printed circuit board. And let me tell you why. So there's a significant amount of discussion about chips. Chips are very, very important. There's no question about that, a lot of investment, a lot of dialogue, a lot of concern about supply chain as it relates to chips and investment in chips.

But there is an expression that we have that puts the Board in its proper context, and that is that chips don't float, they go on a board. So when you see the construct of this business and you look at the printed circuit board and you think about substrate, interposer and heterogeneous packaging, these are all critical elements that enable that chip and that is what TTM brings in its Interconnect Solutions business.

The arrow that you see there in the middle is there on purpose. The position that we have with our customers, the long history that we have, this critical attribute of the electronics ecosystem gives us that early engagement has developed a gate of relationships with our customers and makes us incredibly credible with our customers as we move into integrated products. They understand the criticality of how that board integrates up the chain RF microwave, microelectronics modules all the way up to mission systems. And this is what TTM does. Where we bring those printed circuit board assemblies, the integrated modules, which is becoming more and more important in the supply chain of our defense customers.

As you think about what they do and how they operate, they need companies is that company who can integrate in that value chain. And I'm going to talk about that more in a minute. The formula at the bottom. So this is really the value proposition of our Aerospace and Defense business. That is an end-to-end formula, where you take a PCB and you combine it with specialty components, you get a module. You take that module and you integrate it with software, which we design and can integrate. Put it into an integrated chassis. And ultimately, you get to a mission system, and we are able to operate in that entire value stream end to end wherever our customers need us to, ultimately being able to provide a system like you see there, which is our multi-mode radar on the MH-60 Romeo Seahawk helicopter. A system, by the way, that some pilots in the Navy have referred to as a real differentiator for them in the field.

So it's the look back. Sorry, Edwin, I'm going to had to have a look back, right? let's look back for just a minute. So this is a pretty compelling story what we did in 2025 in our Aerospace and Defense business. You can see the revenue number. That's a pretty great number, right? So 13% year-over-year growth. really proud of that number. But really, what is compelling here is what we did on EBITDA. So in 2025, we put up $221 million of EBITDA and a year-over-year growth of 22%. So what does that tell you? -- nearly double the growth in EBITDA that we did in revenue. And both of those numbers are pretty awesome, but it really tells you that our customers are recognizing the value that TTM is bringing through the suite of products and the solutions that we're providing to them, giving us the 17.2% EBITDA margin, which was 120 basis points growth year-over-year in 2025.

But once you get through all that, which is pretty great. I'll say that a few more times is the bottom part. And that's the real story because that's the look ahead, right? So 1.04 book-to-bill tells you that we booked more than we built in 2025, a clear indicator of a growing business. Our backlog, $1.6 billion. The reason that, that number is so important, so that is sort of the heart of an A&D business. So there is multiyear content in there, gives us great visibility into what we need to do for our supply chain, great visibility into how we need to invest for capacity and is yet another indicator of the confidence that our customers have and the trust they have in us to book that kind of business with us going forward.

And then you see the $7.2 billion pipeline, and that pipeline is growing. There's such a strong demand in defense for what TTM does. We are well positioned to address it, and that's going to continue to grow. All the indications from the Department of War and from our customer base tells us that there are critical programs coming our way and accelerating, you can hear and read about them every single day.

So let me talk just a little bit about our strategy. So I've talked just a bit about the tiers, but the pyramid on the right-hand side really gives you that depiction. So that pyramid reflects that ecosystem of electronics and defense. We play at all 4 tiers. So we have the PCB, the true foundation and heritage of our business as well as the foundation of electronics is Tier 4. We are in a market-leading position there. the #1 in U.S. defense for that Tier 4 PCB manufacturer.

We then move up the chain into modules and assemblies, through to subsystems and then all the way to mission systems with the knowledge and know-how to integrate at every level. When you think about our customer base and that vertical up the value chain arrow, what's happening in our customer base right now, certainly on the defense side is that their demand is growing, which means our demand is growing. But as they are looking at the capabilities that they have stood up in-house for development, design, prototyping and low rate production, they too need to free up capacity. So they look to their supply chain.

And when we think about our competition, our biggest competition really is the primes themselves. Not because we go head-to-head with them, we don't. -- but they keep it in-house. First in that early phase of the life cycle, but then they keep it in-house when they don't have a trusted source to go to for further integration of the chain. And in an environment where their capacity is under pressure, TTM is absolutely at the ready. We have that trusted relationship, that deep relationship. We are in the room with them with our technologies and our capability. And we are the trusted source that they are able to outsource to when they go through that make-buy decision making. -- because we can integrate at any level of the chain.

So we can be proactive with them and design the development, especially in interconnect solutions, and we can react very rapidly when they want to outsource as they need to free up their capacity. -- and focus on the next-gen technology. So if you look at the horizontal arrow, so horizontal can be moving across the mission areas. So we're very strong in radar. More than 50% of our content is oriented toward radar, including radar systems. We have comms, we have surveillance, but that horizontal also refers to, as Edwin mentioned, international opportunity for expansion. We are incredibly well respected here in the United States. We have a very strong position. We are very well known in terms of our opportunity to support U.S. defense requirements.

But if you think about what is happening in Europe, and the European focus on their defense industrial base, who is better positioned than TTM to support them in that growth initiative that they have. So we will replicate our domestic market position in Europe, among other regions of the world. We're accelerating our investment in packaging. Edwin talked about this, and I'll talk about that a bit more and test capability. So when you build products in the department of war and for the Department of War and when you build these kinds of products, often companies in the supply chain just deliver the product, leave the end customer to do the test. You need to deliver a product that you know will work for them every time. So we are improving and investing in our test capabilities so that we can bring more of that test element to our customers.

And I'm going to talk about just a bit more of that deepening of the customer engagement. So this is where we need to have earlier engagement with their engineering organization TTM often finds ourselves as an extension of their engineering bench. We bring the engineering capability to them and the expertise in the areas where we are the subject matter experts, and they bring us in the room like a partner. We are a partner. They call us a strategic partner. That is where you want to be in this industry in this value chain in electronics. So I'm going to take a couple of slides here to talk about 2 of the domains, so defense and space. Just to sort of orient you. The picture up here that you can see is there for a reason. So that is not just a pretty picture. That is the current integrated bowl space. So you have satellites talking to aircraft, you have ships talking to ground stations, you have autonomous aircraft flying throughout that, all talking to each other and all interconnected. Electronically, digitally enabled. And that is the entire domain in which TTM operates and was built to support. And that is going to continue to be not the future battle space, the current modern battle space.

And when you think about the 5 mission areas that are over on the right-hand side, these are all mission areas that are being heavily invested in right now from a defense perspective, and TTM is playing in all of those domains. From an enabling technologies perspective, I'm not going to go through all of those. We have a lot of really amazing engineers who are subject matter experts in those areas. I think the things that are really important to understand about those enabling technologies. These are not futuristic for TTM. These are the enabling technologies that bring us in the room. These are the enabling technologies that we have, that we deploy or are ready to deploy for our customer base, and it is because of those that we get a seat at the table with our customers.

And if you think about what we do on the right-hand side, so I'm going to talk about Counter-UAS for just a minute, which is unmanned aerial systems. So in that domain, if you think about what's going on in the world, some of the conflicts that are out there, drones, have become a key element of that, and not just individual drones, swarms of drones. And this creates a particularly big problem statement for national security and for defense. There are a lot of radars in the world that can probably handle identification of one drone or a couple of drones individually. But the real problem statement is that entire drone swarm. And TTM is solving this capability gap for the Department of Defense, bringing solutions forward on how to identify those drones in that big sworm individually. It's a pretty exciting opportunity for us. something that we are further investing in.

So now I'm going to talk about space. Again, very large, very growing domain. Similar picture on the left-hand side, as you saw before. I think the important thing to remember here is that space. And yes, we've -- TTM as a company a lot of missions into space. This is not just about exploration anymore, right? This is a contested war-fighting domain. And is providing content and focusing on those 4 critical mission areas on the right, all of which are satellite-enabled. And TTM has the long-standing history of rad hard capability -- we've been putting product into space for 40 years. We are trusted by our customers. And the key thing to understand about when you're putting product into space, it must work every time. it must meet all of the requirements of that incredibly steer environment, radiation, wildly variable temperatures, and we are able to do that, and we are trusted to put content up in space.

When we talk about the enabling technologies, the thing to take away here is you see some of these are similar to the last slide. So when we invest and develop an enabling technology, that is applicable to one domain, we are able to port it to multiple domains. So we're able to leverage that capability and replicate it into multiple domains. We get a position on one program that gives us the experience and the capability to insert it into additional programs, and we have been doing that on a very regular basis for quite a long time.

So from a differentiation perspective, what makes TTM stand out. And I think I've given you a few good reasons why TTM stands out, but I'm going to talk through it just in a little bit more detail. But first, I'm going to talk about the image that's on the left-hand side, again, put there by design. So that is the DDG51 Harley Burke, which is a 1 of the, if not the most capable surface combatants in the world. And the reason why I put that platform on the screen here is because I think it's important to understand just for a moment, how the defense department looks at something like that. So that's a ship. It's also a platform. It's a platform for a lot of systems, a lot of highly technical electronic systems.

TTM on that platform supports many systems, not the least of which is the 56 radar system. Maybe you've seen a press release about TTM and the SPY 6 radar system. This is one of our largest programs. It's a highly complex program where we provide not just printed circuit boards, but a huge amount of content from a technology perspective, enabling that 56 radar. In general, we have 12 facilities that are providing technical highly sophisticated technology into that platform and over $25 million worth of content on that 1 ship.

When we think about differentiation, so I talked about our vertical integration. And again, the importance of being able to operate at any vertical, any tier in that supply chain. And we have the diverse product portfolio. Our customers are looking for suppliers in the supply chain who are able to manage more of that supply chain. The days of the primes wanting to take on large behemoth global supply chain infrastructure. And then came to an end with COVID. So in COVID, I think the defense industry really learned as did a number of industries, the companies who could manage more of the supply chain to them, for them was a real asset to them. and TTM is that company. Because of how we operate up the chain, we understand the complexities of going further upstreaming in the supply chain and being able to take on more of that supply chain management on their behalf. -- and we do it on a regular basis. We do it every day.

We have very strong supplier relationships that are a foundation and a differentiator for TTM. We have the multi-decade relationships with the customers that I talked about, and that also translates into the supply chain. So our operations organization does an exceptional job of building supplier relationships and managing those relationships for the long term. The visibility that we have into our pipeline, the visibility that we have into our bookings allows us to translate that into demand for them, which is what they need in order to shore up their capacity and to anticipate the opportunities that TTM is bringing to them through the supply chain.

We have a deep history of innovation first, and we've been doing that for decades. We are at the cutting edge of technology and technology advancement, and we're bringing that to our customers every day. We are not a follower. We have board to system design capability. So I think I've talked about that a bit already. and then the deep program portfolio. And I think that this is the most underappreciated differentiator that we have. So our footprint in the Department of War and the program base that we have there, our ability to see into the future to understand through the communications from our customers the President's budget, from the Department of War and the signals that are being sent about national security programs.

That is what gives us line of sight to our future opportunity, our future potential, where we need to be investing and where we need to be positioning ourselves. So then we talk about investments, and I've talked about what gives us line of sight into capacity. -- and talk a little bit about the picture on the right, and so I'm particularly proud of that picture. So that is our most recent greenfield project began in the middle of 2024 and is about 1 month away from being production-ready, so that is our 212,000 square foot high-tech, ultra high-density interconnect capability. That is on the first floor.

The second floor is reserved for our expansion into advanced packaging. The important part about that project and the reason why it's on the screen is because that was a multifaceted collaboration with our prime customers, the Department of War and TTM in order to onshore a capability that was not found in production in the United States. And this is a clear example of TTM's ability to rapidly for the U.S., stand up capacity, the equipment and the capability to get into production in less than 24 months. On a capability and a requirement that the U.S. Department of Defense did not have access to at a production level until the stand up of this facility. And yet that is not the only investment that we are making in capacity and capability.

So we have Sterling, Virginia. So Sterling, Virginia is the #1 PCB provider for munitions in the United States. And we are expanding that footprint and expanding the equipment there in order to ramp up to capacity to meet the demand of munitions acceleration. Cipla Falls, Wisconsin, which is our largest A&D facility. We are adding equipment and ramping up expansion there in order to meet defense demand, but not just defense demand, also reshoring. We have many customers that are coming to us looking to get capacity from us in the United States for reshoring. And we are doing that in Chipa falls among other locations.

And then finally, we have Farmingdale, New York. So Farmingdale came to us with the Telefonix acquisition. This is the heart of our systems integration, our design of systems, our test and integration capability. We completed an expansion there where we are ready to ramp up and meet new system production and sustainment, which is a long-term revenue stream for us on our products. you think sustainment that is aftermarket, that is fielded equipment comes back for regular repair and maintenance. It is a growing statement of work for TTM.

So just those 4 facilities and the investment that we've made in the capacity there is enabling the potential for $500 million in additional revenue growth. And we think that will be sort of incremental by 2028 from an available capacity perspective. And I'm going to name a couple of programs here because I think it's really important to understand the magnitude of this demand wave. This is all in the public domain. You can all hear about this, right? Munitions acceleration. This is exactly where TTM is poised and positioned to respond from a capacity perspective. We are the #1 PCB provider on munitions in the United States.

And then there's Golden Dome, and Greg Fortier is going to talk to you about that more in detail. We are found inside the programs that are all in the framework of Golden Dom. And then in general, this is not just about and revenue opportunity. That's important. -- me wrong, but it's also a national security imperative and TTM is leaning into the national security imperative, and bringing the additional capacity and the additional capability, preparing for the onshoring that is required to enable the Department of Defense.

So from a program perspective, why does this matter? So we are embedded in the programs that matter. And that is a position that is not given it is earned. And we have earned the privilege to be on these programs through our exceptional performance, our operational execution, the technology that we bring to our customers. And once you are on these programs and embedded in these programs, as long as you perform the way TTM performs, you are incredibly difficult to displace. And not only are you difficult to displace your customers don't want to displace you because we are performing, we are providing them with certainty, the assurance that they are going to get the high-quality products that they need on time every time. And that is what TTM brings to them.

I mentioned munitions. So we are on over 30 munition programs. We are in 20 of the top 25 by spend in the Department of War. We are providing them with the highly sophisticated electronics required for the guidance and precision that is needed with those munitions. We're also very proud to accompany Artemis II and to be a part of that mission. So we had 5 TTM facilities that provided product on ARTEMIS 2, all highly sophisticated technology, radiation hardened capability. Key to that mission. -- and enabling that mission. We're very proud to be a part of that. And we will continue to put product into space as that domain grows.

And then finally, we have the F-35 Lightning, which deserves its own slide. But before I get there, I think it's important to reiterate, we are on 480 programs. We get clear line of sight into the future of those programs. We understand the spend profile. We are on the major national security programs that stand the test of time. You might be able to say they're a little administration agnostic. And we will continue to be for years to come. And if we talk about the F-35, I really like this slide because this slide sort of encapsulates -- what is so important and what differentiates TTM.

So at the center, you have the F-35 Lightning, probably the most sophisticated, most electronically enabled aircraft in the world. And this is a sample of the systems in that aircraft that TTM is providing product to. And you can see here, there are some colorful dots on the screen. -- that we're providing in some cases, well, in all cases, as shown, interconnect solutions. And in some of these systems, we're also providing microelectronics and RF microwave capability and integrated electronics into those systems. Now we don't build those systems. Our customers do, but we enable every single one of them with a highly sophisticated technology that we are providing to these customers.

What's really compelling, I think, is the numbers and the walk down on the side. So over 2,000 TTM parts are on that aircraft, that's on each aircraft, not the program. We have 7 integrator customers that we are supporting with our technology for that program. even customers who trust TTM to bring them our products and our technology to enable that aircraft. We have 8 TTM facilities that are providing products on that aircraft. And then what sort of encapsulates why having a nearly $1.5 billion A&D business is so key to TTM. 2040 for full rate production of that aircraft and then at least 2080 for that aircraft to be in service. So that is more than 50 years where TTM is going to be continuing to provide products and support that aircraft. That is a very compelling place for TTM to operate with nearly half of its business.

And with that, I think I'm going to throw over to Greg Fortier, so he can share a bit more about integrated electronics.

Well, good morning. If I could just ask a show of hands quickly. Aerospace and defense analysts in the room versus commercial? So very few aerospace and defense. I only ask you that because I'm going to start with the aerospace and defense continuum and just try to explain how the aerospace and defense markets are prosecuted from left to right, and then that will weave its way through the rest of the presentation and show you how TTM is uniquely positioned where we actually work in the left to right, continuum, but we start with the right and go to left to enable speed and execution.

My name is Greg Fortier. Honored to be here today as the President of Integrated Electronics and certainly honored to be Talking about that continuum. So if you start on the left side of the defense acquisition system, Aerospace Defense acquisition has continuum. You'll start with requirements analysis, market research, science and technology. You take 1 step to the right what we call the 3D phase, which is design, develop and delivery of those products and weapon systems, progress 1 more step to the right, talk about test and evaluation. A lot of these teams, Cathie has already hit -- but that test and evaluation phase is so critical because you're evaluating whether these products are executing what they're designed to do and then the speed at which you can get through that phase is where you get to the final phase, which is the user phase. And I personally been 30 years in the defense acquisition continuum, I have been in every phase of that and certainly been on the user side for the better part of 10 years. And I could tell you in the combat operations in an armed scout helicopter. When you're pulling the trigger, the last thing you're worried about is whether an integrated electronic or part of your weapon system or what the munition is going to work, right? You just need it to work and it works every time. And certainly, the TTM products do that in spades.

So -- many of these products, as I said, were used by myself and others at TTM over the better part of the last couple of decades. They're being used today in global conflicts across the world, whether that's Ukraine, Iran, et cetera. My purpose here today is really twofold. First is to just outline how the integrated electronics business maps itself through the value chain and across each of what I'll talk about 4 domains. Cathy talked about domains in the context of space and defense. I talk about domains within the context of the land domain, the maritime domain, the air domain and then the space domain and how we map across that, both in the defense space and also in the commercial space.

And then I'm also going to close with some use cases taken at first glance may seem a bit singular in nature, but they actually present unique growth opportunities both in the short term for TTM's integrated electronics business as well as the long term, and they also provide multimarket applicability and derivatives along the way. I hope you take away 4 things from today, and they're really bunched in 2 groups, right? The first how the fundamentals of growth at TTM are leading to product offerings that are really 3 things, right? The first of which is producible and that speaks largely to our tremendous operational capability and capacity to produce products at scale, at speed.

The second is reliable. We have that engineering document that Cathie just spoke about in acquisitions and the like within the business. engineering document to both design early and upfront and that continuum from the left to the right, but also to be the first to the white board, first of the chalkboard. -- to ensure an accurate design to ensure a quick test to get speed of delivery. And then last but not least, high quality. We don't have the luxury of providing products that don't work.

These products, a lot of these products are in space for a long, long time. They need to work for a long time. every time to ensure overall success. The last 2 takeaways are really about the business itself and it's about how balanced the business is how stable the business is in the sense that it's sole source, 90% of the business currently is sole source, and it's a great foundation from which to build. But that balance and that stability also provides us incredible visibility into not only what's in the near term, but also in the long term, allows us to make investments appropriately so that we can lean forward into the next 5 to 10 years, all the while understanding real short-term growth as we prosecute things 5 to 10 years down the road.

So with that, Interent Electronics is 1/4 of the business at TTM. I talked about the continuum left to right, we actually start right to left with a series of fundamentals. So we start with the user. And for those that have followed the defense space and the aerospace and defense space, -- we've been talking about acquisition reform for a long, long time. We have now seen the extantiations of about 10 years' worth of work where the companies that are most successful, the companies that are going to grow are the companies that get with the user first understand the mission set, both across the Department of War, commercially and the like for military customers and then work our way backwards.

So I understand the mission set, ask ourselves the question, what does the customer need, what do they need to achieve, whatever they're trying to achieve. In doing so, you understand very quickly the technical challenges, the technical complexity and the integration challenges because largely, a lot of what today is, and we've seen this in the most recent geopolitical conflicts is how do you integrate enduring systems with future systems? How are you agile enough to respond to evolving threats and then really where the integration happens is where all the magic happens. And then I've talked about it a little bit already, but the testing strategy also will get product to the field as quickly as possible.

The third is capitalizing on the relationships that Cathie talked about. So we spend a lot of time at TTM, certainly in integrated electronics. We spent a lot of time in trailers in the middle of the desert, testing things out. We spent a lot of time in labs. We spend a lot of time in hardware in the loop environments where we're first understanding how these modules, subsystems and systems will integrate in the larger context of what we're trying to accomplish. That forges relationships. It forges trust, and allows us to, quite frankly, answer the questions before they're asked of our first customer and then the end customer, understanding their needs as well. So it gives us a unique competitive advantage along the way.

And if we do all those things, if we start on the right side, and we work our way left and we build the trust, we have the relationships, then we understand how to sell the product appropriately and get it to market and then see the kind of growth that is expected of us. The business itself, really in 3 pieces, components. -- largely microelectronics and microwave components out of Syracuse, New York. These subsystems are seated in 2 areas, Denver, Colorado and Safra Springs. 30% of the business is components, 30% of system -- the businesses subsystems -- and then lastly, radar surveillance and comms. -- depending on what train station you use here in New York City, you can get there in either 56 minutes or maybe an hour or 10 minutes of Grand Central out to Farmingdale, and that's where all of our 40% of our business to include our aftermarket and sustainment business, which is very profitable, that feeds into the overall content of what we're trying to get across here.

We do this work every day. at every site to support every 1 of these domains. Cathie has already articulated really our current positions have done so very well. I'll highlight the growth areas. I'll start at the bottom in these domains at the land, the maritime, the air in the space. The arrows on the right show where we see the largest growth opportunities. And I can say that very confidently because President's Budget '27 has $235 billion dedicated to just 7 budget lines. So let me just read those budget lines and then you can see how they can map to the domains appropriately.

Drone dominance, $74 billion golden fleet. We talked -- we hear a lot about Golden Done, but Golden fleet, $65 billion, autonomy, $54 billion, Golden Dome, $17 billion brand-new air traffic control system, which is not a defense space, but it's critically important for her abroad or in the homeland, $12 billion command-and-control networks, which is, quite frankly, the future of of any armed conflict. The conflicts we're in. I was in 20-plus years ago. You could have fixed sites, you could have fixed bases -- those days are gone. I think we've seen that, right? So the maritime domain is critical as well as command and control soldiers at the edge, sailors at the edge, marines at the edge, having the command-and-control capability at $10 billion. And then industrial base enhancement -- while it's only $3 billion, we're watching this very closely because this is the area where the Department of War understands that they can allocate funds, they can place investments appropriately across the budgetary environment to procure equipment and pure systems However, they do want to develop that organically. So we can get -- be a part of some of that. We feel like we can insert ourselves at multiple levels at the component subsystem level, the Board level to execute that accordingly.

So just 7 budget lines, $235 billion of investment, a very clear signal and present budget '27 and beyond. Obviously, defense programs run out 3 to 5 years and beyond. So it's not just all 235 in 1 year, but certainly worth taking our time, both in the counter UAS space that Cathie spoke about, the edge compute space and then look no further than probably the hardest mission in the world is to the underwater unmanned vehicles to demine the sea, discern what is a mine, what is not a mine, and we're seeing that play out real time in the Strait of Hormuz. So that's not going anywhere anytime soon.

Also important to highlight space, and I'll talk a little bit about that on the next chart with Golden Dome. But power management and cooling, make no mistake about it. As the world evolves, as things get more complex as integrated electronics are demanded more of power management and cooling is at the forefront of all of that and our radiation hardened and radiation and tolerant products have stood the test of time, as I've said, Cathie said 4-plus decades.

So 2 case studies, 1 of which is is Golden Dome, 1 of which is kind of the next generation, if you will. This is a story about product quality, right? It's a story about speed of delivery, for sure. But more importantly, it's about the speed of relevance and how our products, our integrated electronics are going to enable this system, which is in essentially 3 layers underneath the circle is what they call the underlayer -- if you have not heard that term before. above that in the golden dome, if you will, is the upper layer and then the space layer along the way. So we're embedded at every phase. We're embedded at every franchise program, and we're embedded at each of the technological key components.

And if you study Iron Dome and the instantiation of Iron Dome back in 2006 and what it took to get that system up to speed in the first couple of years, you can see a parallel, although the architectures are different. You can see a parallel in how we're going to prosecute this how it's going to be instantiated and how it starts out at the very beginning to prosecute all of the data necessary to make critical decisions. And then, oh, by the way, the integrated Battle Command System something that I'm very familiar with and formal life in Huntsville, ties all of this together from the radars to the munitions to the speed of relevance to the speed of delivery because this is a world where a mistake happens in seconds, and you don't have minutes to respond appropriately.

So we're very, very excited about Golden Dome. -- even more excited that I took a phone call a few months ago and said, get to this location to start talking about Golden Domasapp and got there on site and received our first order very, very quickly, the first of many orders, and we are executing that order as we speak in multiple different layers and multiple different contents.

So deeply embedded in this don't feel like this is going away anytime soon. And I've said it once or twice, I'll say it again, speed of differentiation in terms of prosecution of the overall system but speed of getting the components and only capable because of our 16 factories only capable because of the operational excellence and the ability to manage the supply chain and all of the themes that Cathie has already talked about. And then I'll close with Sensor radar.

So I started with a show of hands about aerospace events. Show of hands, if you're ready to get into an advanced emobility taxi to cruise around New York City. -- no hands raised. I will tell you, perhaps safer than the pilots flying your regional jet in between JFK and DCA given the fact that they're probably 22 years old with a couple of hundred hours of experience. all that said, not to scare you. Sensio radar is coming down the path, okay? Is it coming in 5 years? I don't know, did anybody think they were getting in an autonomous vehicle 5 years ago or 7 years ago or 10 years ago. it will come.

And when it comes with TTM, we'll be ready. And TTM will be ready, quite frankly, because we are at the cutting edge of sensing radar. We're at the cutting edge of the critical path discerning the critical path having the engineers at that continuum as I started with, requirements, analysis, science and technology, developing the technologies, designing, developing, delivering, getting it into the proper hands, prototyping it appropriately and then moving it on to the user.

So this is a 3D story for us, if you will, and no pun intended with the radar, but a 3D story. -- where we sense and avoid radars being built right now in Farmingdale, we'll be flying in the National Airspace next year. That doesn't mean we're all getting in an advance of our mobility vehicle next year, but what it means is we're gathering the data, we're understanding the data. We're reducing the data. We're flying, we're testing, we're fixing. We're flying, we're testing, we're fixing through that cycle.

Again, happy to report that we've received the first order here in this market as well. So leaning forward. What this has also done really as we've leaned forward as TTMs continue to lean forward for decades now is -- you set the conditions with the technology and then you say, okay, this technology sits on this path to serve sense and avoid market, advance our mobility. But oh, look at these derivative markets that can pop up. And this is exactly where brand-new air traffic control system will come into play, exactly where a counter UAS system will come in play.

Because Counter-US is not just putting counter UAS systems on a vehicle that's riding around the Ukraine or some other place that our sons and daughters of America will be sent someday to prosecute conflicts. It's also about fixed sites, counter UAS state side, it's about how do we protect LaGuardia, JFK, do we put a geo-fence around Yankee Stadium, the Super Bowl, the World Series, how about critical infrastructure, Department of Energy, layered defense and depth, all of the different fundamentals and concepts that apply leading the way with identifying the critical path, applying it to derivative markets along the way.

So I will close, and I think we're just about time here, but I'll close with a few just integrated electronics. When you think integrated electronics at TTM, I think fundamentally sound, balanced, stable, forward-looking differentiated across 480 different programs and then plugged into that entire continuum where we're uniquely positioned for future growth. And with that, I'll turn it over to Cathie.

Yes. So I think I'm going to bring us home to a break here. And I'm going to close this out like this. So why do we win? We are aligned to the investments, the large investments in the domains in aerospace and defense. We are leaning in where we need to based on our understanding of those investments. We are trusted. We are very trusted. We have seats at the tables with companies whose names you know very well in the defense industry. We have early engagement with them so that we can understand where they're going and what their priorities are.

But not only that, so that we can influence with our subject matter expertise and our know-how, especially when it comes to the foundation of electronics and the printed circuit board to help them design better and faster and get products to market more quickly. We are bringing them enabling technologies that are emerging in the defense community as well as advanced air mobility, which is going to be a great new market for us. We are differentiated in technology, we are supporting a very durable competitive position. And one of the things that is not here, but is really important to note is how incredibly unique TTM is from an aerospace and defense perspective, in particular, because we have this amazing commercial business ranked in the world with some of the finest capability, process know-how, process development, leading in material selection and material implementation and utilization, and we are able to port that capability and that know-how into the U.S. on behalf of the Department of War and our A&D customers in a way that no other company in the world can do.

We have a mix that have sustainable strong margins, and that is a clear indication of the value that our customers see and the products that we are bringing and in the integration know-how, which is a real value add and a real differentiator for TTM. We are unique in this aerospace and defense industry. We are nearly $1.5 billion ranking us amongst the top A&D companies in the U.S., and we are definitely here to stay, and we're growing. Thank you very much.

Okay. So everybody, what we're going to do is, Greg, if I can invite you up to the stage as well, -- we do have a little bit of extra time for some questions here before the intermission. So what we'll try and do is we'll try and be specific to aerospace and defense. And for any questions coming back to Edwin's presentation, let's hold that to the end in terms of the overarching picture. So myself and [indiscernible] will walk around, [indiscernible] is our Vice President corporate marketing, hand out some microphones for questions. Please identify yourself, the company that you're with and one question and see if we can keep it to that, please. Thank you.

All right. So thanks for the presentation right over here. Steve Fox from Fox Advisors. I'm not an aerospace analyst, so bear with me. But A lot of interest and concepts there. I was wondering if you can talk more about the onshoring potential, like how quickly it happens, what areas is it happening and maybe how it accelerates or does it over the next few years?

Sure. So first of all, we are already feeling orders for onshoring and reshoring, particularly in the interconnect solutions. So on the PCB side of the house. We are seeing it probably more heavily on the commercial aerospace side. There -- if you understand the A&D industry, right, so they are dual-use products and commercial off-the-shelf products and so on and so forth. And what is happening is certainly from a national security perspective is -- we need to have that manufacturing capability here at home. And that is becoming more and more of a priority on the hill. It's becoming more and more of a priority for the Department of War.

And so we are seeing an acceleration of that onshoring -- so it's as much about us being able to stand up capacity as it is about our customers getting lined up to reshore that product. some cases, we have to get qualified in products that were previously manufactured outside the United States, but we are seeing that accelerating.

It's Will Stein from Truist. Good to see you again. I was a little bit surprised, maybe I missed it, but I think I didn't hear any mention of the neo PRIMEs. And I'm hoping you can talk about your position with them and how working with those customers might be different, I suspect, significantly different from the traditional supply chain that exist.

Yes. It's a great question. Well, I appreciate you asking it, not left out for any other reason than sort of this general encapsulation of primes. But it is a really good question. So we are seeing a great deal of interest there. It took us a little bit of time to make sure that they understood who we were and the impact that we have on this industry. And we're now seeing a significant acceleration in that interest competition for capacity, no question. they move very, very quickly. But there is an education process that needs to happen there as well. So we are seeing traction. We've got, in our strategy in terms of customer relationship development -- so I mentioned we have decades of relationships with the primes that everyone recognizes the names of.

With these neo PRIMEs, we are establishing a very similar structure and rigor for that customer relationship development. but they do want to move very, very quickly. And we are at the ready to address them. But they're definitely in the frame for us.

Jim Ricchiuti with Needham. Thank you both for the presentation, for the detailed presentation. I wanted to go back, Cathie, to the pipeline. Can you give us a sense of what that $7.2 billion pipeline might have looked like a year or so ago? And can you talk to how we think about the big pieces to that, whether it's Golden Dome, replenishment, which we're all hearing about on the munitions side, space drones, counter UAS, Give us some flavor for that, if you could.

Sure. I can certainly answer part of that. So -- so in the spirit of full disclosure, when we were looking at our pipeline even a year or 2 ago, the way that, that demand was coming to us, we did not have as much of the rigor and discipline around the development of that pipeline. And so I can't give you a simple equation. It was this, and it's now this. But what I can tell you is that as we've been looking at that pipeline, which is a multiyear set of opportunities, the discipline that we've applied to what we're looking at has come from this bow wave of massive demand. And so it's grown pretty dramatically just in the last year as we've put that discipline in place and we're looking more closely at that pipeline.

It does have attributes of Golden Dome as attributes of UAS. It also has attributes of many of the programs that I talked about. And we don't talk about the specifics because we're send that kind of a signal to anybody out there related to what our pipeline is. But it is a very strong complement of defense opportunities, mostly. So I put in line of sight to my guy who manages my pipeline for me. heavily oriented to defense probably nicely weighted towards programs where we already have a position, so I think recurring and sustainable and then new business as well. So I think that's probably the best way that I can characterize that for you. I can also share that the $7.2 billion pipeline that we had at the end of the year has already significantly grown just up through May.

Yes. And if I could just double click on the new business aspect, right? Integrated Electronics specifically, is bidding and qualifying new deals and different deals because we can because we're uniquely positioned. We're very stable. -- and we have excessive demand on some of the franchise programs that we can go after new things. So you can only see that number grow, not contract.

This is Brett Lyle from [indiscernible] Capital. I had a question regarding space. I was wondering if you could help us understand the customer sets that you have in more detail and get a better understanding of how you see the growth opportunity evolving in the many years to come as commercialization in space evolves?

Yes. So what I didn't actually talk -- it's a great question. I appreciate it. So we are addressing both national security space, which we've been doing for a long time and commercial space. And I'm not going to be able to give you a list of the specific customers that we address, but I think they're probably recognizable names to you. We are seeing a rapid acceleration in commercial space. which I think is not unexpected, right? It is the history of our capability in radiation-hardened. We are migrating that to radiation tolerant -- and just for the audience benefit, right, if you think about rad hard goes way, way, way, way out in space, so [indiscernible] rad-tolerant, this is how you take cost out. This is how you take weight out and more of that commercial LEO domain. And so we have migrated our products from a microelectronics perspective and what we're doing with our PCBs to better address that rad-tolerant lower cost, lower rate domain.

And it is -- there is a decent amount of defense space acceleration, but commercial is where the real growth is coming.

Thank you for the question, Sahej Singh from Stifel on behalf of Ruben Roy. I really appreciate the continuum that you laid out and the fact that you guys are approaching it from the right a bit of a 2-parter here. The first is, is it fair then to assume that the contracts that you are bidding on and winning are mostly firm fixed price, meaning margin accretive opportunities pointing to the 8-K that you guys filed earlier today. Second part of that question is then with the advanced packaging facilities or opportunities that may be in the pipeline, how should we think of that? Is that more time and materials? Is that more firm fixed price? How does that work? And when do we expect that to start contributing?

Yes. So great question. Greg might be able to add a little bit of color here or even Tom [indiscernible]. But I think the first question that you asked is the answer is, that's accurate. So largely bid in a firm fixed price way, set that price, have a contract that runs over a period of time. with whatever those conditions may be. When it comes to the way that we are looking at integrated electronics, you want to add a little bit of color.

Absolutely. So the first thing to understand is that the government, specifically Department of War is buying much differently than they've ever bought before -- and we've all heard about OTAs, right? You've heard about CSOs as well. That's exactly what I was getting at in my presentation, when I talk about uniquely positioned for specifically the counter UAS space as well as some of the other assembly type space where we can now put our modules, subsystems and sometimes systems on marketplaces, right?

So specifically in Army Aviation, program aviation element is put out a marketplace that you can bid and is exactly what you just said, right? It's much more accretive work. It's all about speed, right? So years ago, and this is not an exaggeration, but Huntsville, Alabama used to tout the contract agencies to be proud about a 600-day process to award a contract, right? We're seeing that now turned in 30 to 45 days. again, starting with the right side or just saying, "Hey, we have this capability. We're going to put it on your marketplace and then you can go procure this either commercially or not across that entire continuum as we've talked about.

So yes, there is no other option other than to be more accretive. I will say some of our programs are still subject to certified cost and pricing, as you're well aware. So we balance that appropriately. But back to the pipeline question specifically, -- these are the things we're adding to the pipeline. These are the things that are growing, and these are the conditions that we're setting to grow the business.

And if you think about the importance of operational execution, right? So Jim Walsh and his ops organization yield is 1 of their critical metrics. And that goes to your earlier question about fixed price contracting and setting those prices in advance. And that is one of the best ways that we can improve our margin position when it comes to one or contracted work.

So let me talk about advanced packaging. So we already do advanced packaging today in our CRC facility. The new facility that I showed you the picture of was built immediately next door to that facility in part for that very reason, right? So we have the subject matter expertise in the type of packaging that we do today in Syracuse, lower rate, lower volumes, right? But we are investing to stand up that capability at scale. We've had a lot of requests from our customer base to move more rapidly into that footprint. And so we are underway on the advancement of that investment and the stand-up of that capability at scale on the second floor of the new Syracuse building. So it's coming.

[indiscernible] Johnson here from B. Riley on behalf of Mike Crawford. Just double tapping on the $500 million in incremental revenue you guys were referring to for the 4 new North American facilities, how should we think about that $500 million split across those facilities?

Yes. So it's projected, right? That's the kind of capacity that we are creating with our investments. So I think that's what we really need to think about is. So we're seeing demand signals coming to us, and we're seeing the requirements of the Department of War and our customers. And so we're creating that kind of potential capacity. I wouldn't split it over facilities. Certainly, Syracuse is the largest of the facilities is brand new, and that will generate the most opportunity for us. But as I say, those were examples that sort of correlated to that kind of capacity.

Okay. So everybody, I think that we're pretty much on schedule here. We're going to have about a half hour break. And what I'm going to encourage everybody to do is find your way around the room. We have more executives here than just the presenters. We have our full direct report team to Edwin and a lot of very bright folks who can provide a lot of insight. So we have our own little organization for how we're going to break out as teams throughout the room. I encourage you use a bio break, grab a snack, grab a coffee and have some good conversation. We'll reconvene at 10:30 Eastern. And for the webcast, we'll go to break now. Thanks, everybody.

[Break]

Okay, everybody, we're going to get started again relatively soon, just a couple of minutes. So if I can ask folks to try and disaggregate and get to your seats, that would be extremely helpful. Thanks.

Okay. Everybody, thanks for joining us back after break now. And for webcast participants, thank you for coming back as well.

Up here on the stage with me is our Executive Vice President and the Head of our Commercial Business, Doug Soder. Doug will talk through all of the exciting opportunities and business aspects of what it is that we're doing in our commercial markets.

And as indicated a little bit earlier, he'll be followed up by Rob Farrell, who heads up our Data Center Networking Business; and then Dan Boehle, who is our Executive Vice and Chief Financial Officer.

So that being said, let me see if I can hand over the podium to Doug. Thanks so much, Doug, for joining us.

Thanks, Sean. Hey, welcome back, and thanks for being here today. It's really a pleasure for me to be able to spend the next part of our meeting this morning, giving you an update and an overview on the commercial sector, our business and our strategy.

So let me dive right in. Commercial sector at a glance. Look, I think the first point I want to make is that we are a leader of advanced interconnect solutions across diverse end markets and with leading customers in each of those markets.

We're a global leader in data center and network, as many of you know. We're also #1 in medical and we're #1 in industrial and instrumentation. And as Edwin said, we've taken a more targeted niche approach to attractive opportunities in automotive.

Our business is characterized by deep and long-standing customer relations. Many of these customers, we've been working with for a decade or decades. But on the other hand, in some of the markets, we're also working with start-ups and newer customers. So it's a nice blend of new and old, but we have a very strong reputation in each of these end markets.

And a key aspect I'll be talking about is our unique global footprint, which really allows us to support our customers how they need to be supported based on their different requirements for products and services. And the last point I would make here is if you look at Prismark's 25 ranking of top players in terms of revenue in this business, TTM was the only PCB company on that list in the top 5 last year. And for that matter, we're the only U.S. company in the top 10.

So looking back at 2025, we also enjoyed a very strong year in terms of profitable growth and also comparisons across the business. You can see about $1.6 billion in revenue, and that was up 24% year-on-year. I'll talk about how that was comprised across the end markets in a moment. EBITDA, $304 million, up 26%. And we had margin expansion, EBITDA margin, growing 29 basis points.

As importantly as those numbers, though, we booked over $1.8 billion. So we really set ourselves up coming into 2026 with good strength and momentum. And just to give you a reference, we deal with over 700 active OEM customers across these end markets.

So taking a deeper look at that commercial sector business and our end markets, you can see that balance we talked about. And really, this gives you, on the left, a sense of how the end markets break out in terms of revenue percentage of the total of TTM's total revenue. Data center networking, very big, very important, but balanced relatively, 30% last year. Our medical, industrial instrumentation at 14% and auto at 10%.

If you look at the right-hand side of the slide, a little more detail to dive into. The Data Center Networking business, about $900 million last year. And you can see the strong year-on-year performance in that business, up 40% year-on-year. When you look at our serviceable available market on a global basis, it's clearly a fast-growing market, about $10 billion, and we're at about 9% market share. Areas of focus for us are both data center and networking switching as well as high compute AI servers and general purpose servers.

Often lost in the shadows of that exciting network data center business is our medical industrial instrumentation business. And I want you to look closely at these numbers, $400 million last year. That business, under Anthony Sandeen, grew 22% last year. So it's a really exciting business for us. And it is characterized by a very high count of customers. So there's a lot of diversification in this business across the various aspects of MII.

Here we have about 18% of serviceable available market. It's about a $2.3 billion market. So a lot of opportunity for us. We really like this part of the business. We're involved in things like on the medical side, patient monitoring, test and diagnostic equipment. You get into industrial automation and robotics and semiconductor test, to name a few of the areas where we are participating. And then you see the automotive business there at about $300 million last year, down slightly year-on-year. And areas of focus here are where we can bring our technology to bear, in areas like ADAS, electrification, high-voltage management systems, et cetera.

So let me talk here a bit on this next slide about our strategy. And really, a key point I want you to understand is when we look at this business, we are really looking for ways where we can differentiate the commercial sector to deliver market outperformance and sustainable growth. Differentiation is really the key for us. We're looking to find these unique runways where we can have long-term profitable growth, but also, as I was talking to some of you during the break, minimize our exposure to commoditization. That's really the key here.

And we're looking to things -- looking to use things like our product expertise, our processing expertise, that global footprint I manage. There's long-term relations where we can be differentiated.

And the strategy itself is very simple, 4 basic building blocks: targeted end market and customer engagements, focused advanced technology leadership, global footprint management for differentiated outcomes. What does that mean? It means a lot of things.

And we've got a very special and unique global footprint. We're in North America. We're in China, we're in Southeast Asia. So that gives us a lot of opportunities with those -- that plant count that was mentioned before to support our customers in a variety of ways. We can support customers that want to develop in the U.S. and migrate production to Asia. We can support customers that need small lots built very quickly for prototyping and NPI and other plants to do production. We can use multiple plants to support very large production programs. And we can provide those regional opportunities for customers focused on geo-diversity, supply chain resiliency and China-plus solutions.

And then the last thing, and I'll touch about on this later, is a disciplined approach to how we invest for capacity and capability.

Megatrends. Obviously, the main one for the commercial sector that we're involved in right now is this artificial intelligence. And I think as exciting as it has been and is, it's very exciting to recognize that we're in the early stages of this game.

But some other ones that you should be aware of is factory automation and robotics. This is important for the MII business, as is the demographic and an aging global demographic, which is really fueling a lot of advancements in med tech, and that's creating a lot of opportunities for our medical business as well.

So I talked about our main markets. I'm just going to use these next couple of slides to focus in on a couple of the very important markets that we're involved in. And the first is data center networking. And I want to make a couple of key points here to dispel some misunderstandings about our business.

The first is that we're a global leader, but we're really processing unit agnostic or chip agnostic. We're really working across multiple data center ecosystems with customers that are hyperscalers, AI developers, AI infrastructure companies and networking companies. Our boards work with all of these chips. And that's an important point that I think we really need you to understand.

Where do our products go? They're going in these high compute AI servers, switches in the data center as well as enterprise, general purpose servers, and then backplane, mid-plane chassis. If you look at following a slide pattern Cathy used enabling technologies at the bottom, some of the advanced technology products that we're supporting customers in this space with now include N+M PCBs. These are asymmetric hybrid high-layer count products. Rob is going to talk more about that in his section. High and ultra-high-layer count PCBs, which I'll mention more about in a few slides. And then HDI stacked microvias.

Another area of expertise that's really important for our long-term success is the fact that we have been long recognized as a material expert. So when we talk about early engagement selling, we -- it often starts around materials where our customers are asking us to share results from a very comprehensive test library we've built over the years. We're looking at that with them at what material or, in some case, combination materials are going to best allow them to achieve their performance requirements as well as their cost requirements.

And then a couple of other points I highlight here, early engagement with customers as they're looking into optical packaging and products in the near-term horizon. And then in certain cases, we're also bringing TTM proprietary IP solutions to bear to help that same challenges that they may be dealing with. So that's the data center networking.

Medical. I mentioned number one, here again, we are bringing our technology to bear to enable these state-of-the-art med tech advancements. And these are things like patient monitoring, implantables, surgical robotics, and then big test and diagnostic pieces of equipment. So in this market, the types of products that we are bringing to support our customers are advanced tech PCBs. Also something we haven't talked too much about today are what we call [ Rigid Flex ]. These are boards that are a combination of hard, rigid product as well as flexible circuitry.

And then the other thing is miniature to large format. This is an array of an nonpatient monitoring product. And that array has about 24 boards on it. So if you look at that big diagnostic piece of equipment, you would see large PCBs in that. But we're doing miniature to large in this medical space, HDI, stacked microvias, again, the materials.

And something I didn't mention on the last slide is the high-mix factory. So when you get into the medical and industrial instrumentation business, these customers typically are dealing with large portfolios of part numbers and, generally speaking, lower volumes than we see in data center networking. The reality is, as much as competitors try to do it, that type of product does not play well in a mass production factory. What TTM has done over the years has built a very capable portfolio of plants around the world that focus on high-mix factories. This really provides value to this set of customers, and it gives us a capability and advantage that a lot of our competitors do not have.

Industrial instrumentation, also a #1 position. And here we're supporting innovation in things like industrial automation, network analyzers and other type of analytical equipment, semiconductor tests. Something you may not know. We're involved in the oil and gas industry in terms of downhole drilling controls, also utility management systems. Very diverse set of customers across this space, but a very nice piece of business for us. Here again you're looking at advanced tech PCBs, similar to what we've seen. And then I won't go through it all, but you're taking advantage of these high-mix factories again.

So looking at a couple of the tenets in that strategy. First, advanced technology. Really, in this arena, it all starts with early engagement and early collaboration with our customers. That's what we need to do to be successful on these strategic programs. And what we've done is built a global technology solutions sales force, so to speak, that's positioned around the world. And this is essential for these early engagement conversations that happen in areas like material selection and design validation. So that's where it all starts, with those FAEs, as field applications and other engineers from our factories.

We also have technology labs. We have one in Asia, in China, one in the United States. And we're going to be building an innovation center in that Eau Claire facility in the future. The advantage of these labs is that we can do analytics and testing to really back up some of the early concepts that are being considered with our customers. And then we use that unique footprint to address the prototyping and the NPI into production ramp.

Some examples of product technology that has gone or is going through this process would be asymmetric N+M PCBs, the high-layer count, the optical product and then co-op development. And I'll talk a little bit about each of those here.

So we've mentioned N+M numerous times, but this is a very exciting part of our business at this stage in the business cycle. This is something that went through that exact process I described several years back. And we are now entering into mass production with N+M technology. And these are boards, just to give you a sense, that are going to be 36 to 50-layer type constructions.

If you look to the right, you see this ultra-high layer mid-plane and back plane. So this is a product that's quickly gaining some interest across the commercial sector. We're really dealing with companies that are in both the data center networking as well as the MII side who have a need for higher layer count. And I'll tell you a little bit more about that product and how it's produced, why it's attractive to us in the next slide.

And then on the bottom, you see some examples of product technologies that I would say are in the development, various stages of the early development, the optical side and then packaging. Just to give you a little more sense of what we're doing here, we're supporting customers who are looking at moving beyond current packaging solutions, moving beyond chip on wafer on substrate towards chip on wafer on PCB, and even looking beyond that in the future to how they can go direct chip attached to the PCB. And that's a longer-term process. But it gives you a sense at any -- of the pipeline at any point in time is going to have product that's going into production now to products that are 2, 3, 4, 5 years out.

I wanted to spend a little more time on this ultra-high layer count backplane because it's a great example of that focused technology development I spoke about in the beginning, where we're leveraging differentiated TTM processing and product leadership capabilities to support our customers, but in a way that it creates a natural differentiation and competitive advantage as well. When you're doing something like I'm about to describe, you're going to have one of these product families like Edwin described where you may have a handful of companies in the world that can produce this type of technology. These are customers that are looking to go beyond what a traditional Max PCB layer count has been considered around 60. And these are customers that are needing 80, 100, even up to 150 layers for their particular end-use applications.

So what's important, large format capability, high layer count, that materials knowledge and processing expertise I spoke of, and then something called sintered paste. This is key to this process. Sintered paste is a conductive -- electronically -- electrical conductive paste that also has thermal management properties. And so when you're looking at something like this, you got to bring all of those areas of expertise to bear for the customer.

When I talk about large format, you're talking about boards that could be over 1.5 inch thick. So you're getting into a situation where you can't use traditional conventional processing capabilities to build that board in a normal way. Example, you can't drill something 1.5 inch thick in a conventional PCB factory. You can't plate it.

So what we're doing in this case, and you can see it if you look carefully, you're taking relatively high layer count subs or subsections in and of themselves. And then we're connecting them ultimately with that sintered paste. Sounds simple, except there's tens of thousands, maybe 100,000 connection points. You need precision placement of the paste and then expertise in bonding that together so that it comes out and performs electrically.

Obviously, you're going to limit the field of competition when you're doing something like this. And it's very attractive to TTM to be involved in these types of conversations. Why is the customer doing it? In many cases, they're looking to get rid of a massive heavy cables. It cleans up the packaging. It eliminates reliability risks and effectively gives them an improved total cost of ownership. So something to keep your eye on in the future across these commercial sector markets.

Next, I want to look at our footprint. We talked about that unique footprint. And before I get into the commercial footprint itself, I want to talk about a couple of points that I think illustrate our commitment and maybe our somewhat unique approach to how we are building a commercial sector footprint that supports our customers and the growth we see.

The first point is we've invested $1 billion in this commercial sector footprint over the recent few years. Secondly, several conversations I had, when people think about capacity additions now, it seems to all focus on greenfields, big greenfield factories and lots of them. And certainly, that's one aspect of adding capacity.

But our approach is a little more nuanced, and it's really about choosing the best path to effectively deploy CapEx based on the needed scale and timing. And so what we've done, in some cases under the radar, is quite effectively increased our capacity and capability with different approaches that aren't necessarily greenfield. We did Penang, we're excited about Syracuse, and we'll look at future greenfields in the future.

But we're also doing things like adding significant capacity within an existing footprint or adjacent to that factory. That gives you a couple of advantages if you have the space to do it. You're going to leverage a proven management team, you're going to leverage a proven workforce, and you're going to get that capacity and capability to market a lot faster than a greenfield.

Another approach is a brownfield, so to speak. This is where we're looking at finding existing buildings. Maybe they have electronics infrastructure or not, but they're suitable to be converted into PCB production. Eau Claire is a perfect example. The advantage here is we get a lot of footprint that we think is well suited for PCB manufacturing, and we get it to market for our customers in half the time or less than a greenfield. And then there's a greenfield.

So I just wanted to make that distinction because there's always talk about new factories, and that's just one part of the equation. And we'll talk about how we're deploying some of these alternatives in a few slides. But in the meantime, the commercial sector footprint. In the United States and Canada, we have Toronto, Logan, San Jose. These are well-proven factories that support our customers of quick turn, NPI and high mix production across all of our end markets. Eau Claire, very excited about that, will be the largest independent advanced interconnect plant in the United States when we bring it to market.

In China, we've got 4 mainstay production plants, Dongguan and Guangzhou. These are the plants where we will be introducing the N+M in mass production. And they do a variety of other advanced tech PCB products. [ Huiyang ] is an interesting plant capable of doing, really across the board, our advanced tech product technologies, but they're also one of those high mix factories. And so very successful at providing quick turn and MPI support to customers in our MII business. And then [ Junsang ] has historically been an auto specialty plant. But over the last 5 years, we've developed a very nice capability to support non-auto advanced tech PCB production.

And then in Southeast Asia, Penang. You're all familiar with Penang. And that's really focused on customers in data center networking and MII for high-tech PCBs. And we've taken the step to secure land nearby so that we have the opportunity, when appropriate, to be able to build a second factory that would focus on advanced tech PCBs.

Now speaking of Penang, I wanted to draw your attention to an interesting similarity from the movie, the scene, The Matrix. If you look in the upper right-hand corner, that came from that movie. That main picture is the main production viewing hall in the Penang plant. It's over 400 meters long. It's quite impressive. And aside from the movie reference here, I think it also speaks to the scale of that factory and the high-tech state-of-the-art nature of that factory. It's really quite a showpiece with a lot of automation and really an exciting addition to the TTM footprint.

So you bring it together, I've talked about that technology development, I've talked about the footprint. And when you look at what I'm going to refer to as the N+M scale-up, which is what we are doing right now, this is a great example of how the commercial sector executes our strategy. It is a result of that focused technology engagement process. It is a result of global footprint execution. It's also a result of those other elements I mentioned, the targeting of the right customers in the right end market and selecting the right scale-up solution for our customers for this opportunity at this point in time.

And the scale-up that we're using here is really that build-out within existing factories, Dongguan, Guangzhou, and then brownfielding next to those factories where we're able to bring a lot of additional capacity firepower to play, but under the leadership of those 2 very long-term successful plants in TTM.

We are anticipating $450 million of capital investments in N+M when you look back the period '25, '26 and into next year. $300 million was really to develop the capability and to bring it up to production in '25 and '26. And then another $150 million to expand that capacity capability next year.

We're currently estimating a revenue opportunity over the future for N+M at $4.5 billion. And this again has started with customers across those multiple data center ecosystems, but we're also seeing the interest expand-now to MII customers.

Now I talked about those scale-up options and speed, and I think, hopefully, this next set of pictures can put some of my words into perspective for you. Several of us were in Dongguan back in March, 2 months ago. And that brownfield building we acquired right next to Dongguan, that's what it looked like 2 months ago. This is what it looked like yesterday. 270 advanced tech drills, fully operational, supporting the N+M ramp. That's how we bring capacity and capability to bear quickly and effectively for our customers at large scale.

Okay. Before I hand it off to Rob, I just want to talk about 2 success stories from the MII business. And what's interesting is the way that these teams created these success stories were different even though they're both medical customers. On the left, the side you see right now, this is a surgical robotics company. It's a company we've had a long-term relationship with. And it's always started at that early engagement, those engineering collaboration discussions.

What we've also done is leverage that footprint. We use 4 different plants to support this customer for prototyping, for NPI, for multiple plant production solutions. The other thing that we've done is that we've been able to run NPI in their main preferred production plant so that we can qualify and accelerate the FDA qualifications that they need to go through. FDA doesn't want the product qualified in one plant and then produced in another. So we're able to bring that flexibility to bear, to do quick turn for this customer. And it's an advantage to them. And it really allows them to shorten the -- what can be a long and pretty arduous process dealing with the FDA.

You put it all together, that early engagement, the footprint management, the flexibility of the footprint, this is a company where we have about 75% market share.

The second example is a company doing these types of products, glucose monitoring devices. We've been working with this customer for about 20 years. And again, it starts with that engineering engagement and collaboration. We've shipped over 300 million devices to this customer. So quick turn and production, again, in the production factories to shorten FDA qual cycles.

It's really about technology leadership with this customer. And in this case, HDI and miniaturization are important. And this is impressive. The next generation is going to be half as big. So those are the kind of challenges that we're working with this particular customer. And again, coincidentally, we have about 75% share with this customer. But it's -- we've been dealing with these people for almost 20 years. And it's really just in the last year that we've increased that share to 75%. So that's a real testament to the confidence and the faith that they put in TTM.

So at this point, I'm going to turn it over to Rob, and then I'll come back up for some concluding comments. Thank you.

Thank you, Doug. Those are tough facts to follow. Sometimes you get in your little business unit, you don't get a chance to appreciate what's going on around you. So it was fun to sit through that. So I'm going to take you through a little bit about technology. Doug touched on it today, a little bit about just mass kind of landscape of the data center environment.

So I couldn't help but reflect a little bit. I got some really good questions at the breakout. And I started reflecting through where -- kind of my role in this. And I came in to be President 4 years ago and was asked to do something entirely different than what we're having to do today. And today, honestly, is really exciting. Hopefully, you guys get a sense of that and kind of where we're going and all the work that's been put in to make us successful.

So first of all, I'd like to talk just a little bit about kind of a macro chart here. This is the 4 largest data center estimated CapEx over the next 3 to 4 years. I want to make a couple of comments on this. One is this does not take into account the build-out that's going to occur in China. So you're going to have a second wave of data centers that's going to come into the market that's going to obviously impact us and all of our customers. It doesn't include companies like OpenAI, others that you probably are tracking as far from a spend. So this is just kind of just one area, one indicator of what the industry is going to experience here over the next few years.

It has been exciting here in the last 3 years, and it's going to be, I think, just equally exciting as this build-out continues. I personally think that there's still a little bit more in this from a growth standpoint. You're going to have build-outs, plus you're going to have to start seeing some of the replacements that's going to have to occur in the industry as some of these systems start to get a little bit older as you get into the out years. So it's something that we're going to monitor, something that we're watching.

When you look to what's driving this, there's really 3 main areas here. The industry has changed a lot. Speed to market is way different than it was 3 or 4 years ago. It's probably twice as fast as it was. So as you see these ramps, a lot of this is new programs that are going to be coming online in the next couple of years. And some of that, the development is taking place today.

You have the technology, which Doug hit on, and I'm going to elaborate on here as we get into the presentation. And then you have -- which we -- I think we all like and enjoy is ASP due to technology, where the industry stands. We've had an opportunity to work on pricing, both from a technology standpoint as well as the material costs and other things go up. Some of the programs that you're seeing replacements are 2 or 3x what they were in past generations. So a lot of positive things occurring in the overall industry.

So grab these. So Doug hit on it, talked a little bit about N+M. N+M is something that we've been working on, quite frankly, for over 2 years. We started with an engagement with one of our strategic customers and looking at how do they resolve some issues that they're having in the design stage. The main reason for N+M development is to get enough power into the chips and not mess up the signal integrity of your product.

So for those of us who have been doing this for a long time, this breaks just about every rule from a manufacturing standpoint when you manufacture printed circuit boards. So in the past, if you can think of it as a centerpiece, you have a center of a PCB this side of it. You want everything to be equal on both sides, whether it be layers, whether it be materials, whether it be copper distribution. And as you can see from the picture up here, we've thrown all of that out. And the technology has driven us to do that.

So today, very heavy, very thick boards, today, the whole idea of this technology is to get the power into this chip. Also in manufacturing it, the real challenge is manufacturing is to be flat, have a flat [ open area ] or flat [ VGA ] package. Manufacturers that are able to do that, both working with the customer upfront as well as optimizing their processes, is going to be a winner in this technology. Today you're looking at 1.6T switches, you're looking at AI ASICs that are going to utilize this technology. And we have spent the better part of the last 12 to 14 months taking the information and then trying to really retool our factories, Guangzhou and Dongguan, to support this ramp, which is going to, in effect, take place this summer and into the second half of the year. So much different technology than we were dealing with even 12 months ago.

So what does that look like for us? As I mentioned, the front-end work with our customers started in our Dongguan facility. That's where the last probably 24 months we worked to optimize our process, work with the customers, make minor and minor design changes to make it more manufacturable. In the past, you used to be able to kind of create a book and know what the product was going to do when it came into your factory. And going to this N+M technology now, it's so many variables. You really have to work upfront. You have to work with your customer in the introduction stage to really optimize your processes to get that flat board and, more importantly, that flat VGA period.

As we work with our customers, it became very evident that we were going to need more capacity. So what we do in TTM is you just pivot to your sister plant. That's what's beautiful about TTM with our footprint. We pivoted to Guangzhou. So 14 months ago, we made the decision that we're going to retool both Dongguan and Guangzhou. Great plan, we feel good about it. But like every good plan, you get punched in the mouth and you see where you end up. For us, it was a customer that beat us to the punch. They needed capacity. They needed it last year for N+M. All the planning we had done, we had to pivot. We had to go to our HY facility, sorry, Huiyang facility.

That wasn't in the plans. But what we have the ability to do at TTM is to pivot. We had all lessons learned, engineering resources, move them over to HY for a handful of weeks. That facility comes up. Find out not enough capacity, pivot again, go to Penang. And honestly, for Penang, I think in 2025, it was the largest revenue part number in Penang with an N+M -- advanced tech N+M board. Those 2 facilities beat DMC and Guangzhou to the punch. And it was fun to see how we were able to pivot and support that customer.

Now as we talk to our customers, more and more of them want solutions outside of China as well. So we're looking to pivot the same technology to our Penang facility, which I just mentioned has already come up. Our Eau Claire facility will almost certainly have N+M technology. Penang 2 site most likely to have N+M technology. And then our Toronto facility is going to be able to play a role in the development, more than likely bringing on this technology. As I mentioned, speed to market is twice as fast as it was a few years ago. So to have that capability in North America, to work with our North American customers is going to be key in helping them get to market quicker. And then being able to take lessons learned and move that to a production facility is going to be paramount.

So as we start talking about kind of the case study here, I sat down and really put one together based on one customer. And it quickly became apparent that it really applies to multiple customers. So from a generic standpoint, upfront engagement, as I've already said a couple of times, is really key in understanding what it is they're trying to accomplish, what does that look like from a manufacturing standpoint. Worked with Jim Walsh and his team from an operations. Do we have the capacity in place? Some of you asked at the breakout, how do we manage capacity? How do we go after these "franchise programs"? And a lot of time and effort is now put into understanding what the overall demand is going to be for any one program, any one project. And so we've got various trackers, we work with our operations team, we work with supply chain to make sure that we're going to be set up for success as these projects near production. And I think we've done a really good job of doing that. And from day-to-day, we're working with our customers on day slips or that 2-day slips, 1-day slip, and we're in tune that closely with them on these ramps that are going to occur in the second half of the year.

Now today, most of it's 1.6 and, as I mentioned, AI ASICs. The industry will continue to use this technology when it goes to 3.2. And that's where we're at now working with customers, is working on that next-generation 3.2. There could be some changes in flavor, but for the most part, you're going to use the same structure as we do today. Only you're going to go from probably a 36, 38, probably upwards to a 50-layer will be the main change as we go to the 3.2 chip.

Now my last slide here before I hand it back over to Doug. So everyone in here probably has read about optics. It's exciting. TTM has been investing in optics for well over 10 years. We keep thinking that the next generation is the last time that copper is going to be used. You're just going to -- it's going to be a bandwidth issue. And this slide is -- I'm going to talk out of both sides of my mouth just a little bit here because we do think optics is coming. Edwin sits on the Optica board. We have a team of people developing optics. We have close relationships with OEM customers as we develop. We've got a couple of different variations on what that looks like, and I don't think the industry has adopted one of them yet. But we're largely invested in optics. And for all the reasons you're seeing on the slide here: energy consumption, signal integrity, bandwidth. That's all coming.

But I do want to caution you, the early 3.2 designs we have do not include optics yet. So there isn't a cliff. There isn't a falloff on copper. It's going to be implemented at some point in time, and TTM thinks that we're uniquely positioned to maximize and optimize that opportunity. And we'll use kind of the playbook we put in place for N+M, but it's really exciting to see. To us, it's going to be an addition. And it's going to be an addition we'll try to understand what that technology looks like as you introduce that into or onto the PCB board.

So with that, I think I will hand it back over to Doug to give closing statements. Thank you.

Okay. Thank you. Hopefully, that's been insightful and informative to you, and you've recognized, as I talked to some of you in the beginning during the break, we're much more about data center and networking. We have a very set -- exciting mix of businesses, and we've got a formula that's working.

I think to sum it all up, it comes down to focus, competitive differentiation and then speed and execution, focus on engaging the right markets and the right customers within those markets. picking the right -- the technologies to invest to give us competitive advantage. And it's got to be backed up by operational excellence. I'm looking at Jim Walsh, our COO. But we -- everything we talked about today, we have to deliver on time with great quality because these are going into very high-reliability dependent applications.

Competitive differentiation, leveraging TTM's financial strength to pick those targeted areas of technology leadership where we can have a long and differentiated runway for profitable growth. and executing that footprint in a way that adds value for our customers and sets us apart from our competition.

And then speed and execution, bringing that product and that technology to bear quickly, choosing the appropriate scale-up solution so that we can effectively convert our CapEx investments into revenue as quickly as possible. This formula is allowing us to succeed now and to grow now, and it's the foundation for why we are going to continue to win in the future.

So again, we thank you for your attention to this section. And it's now my pleasure to turn it over to Dan Boehle, our Chief Financial Officer.

Hello, everyone. Well, it looks different from up here. Listen, today, hopefully, as Edwin said earlier, you get to speak with Edwin, myself and Sean quite a bit at different conferences and on the phone and everything else, so hopefully, you got a lot of perspective today from the folks amongst the business that actually do the work and actually create what a great company we have here at TTM. If you didn't get a time to speak with them at the break, do that -- do so after we do this and gather for lunch. But that's what we brought you here today for.

But I know you also want to see some numbers. So I've got a few slides to go through some numbers with you and talk about what the priorities are, talk about where we're going to end up in 2026. Then I will hand it over to Edwin for a wrap-up, and then we'll allow you to ask more questions after that.

So financial priorities. So currently focused on 3 major priorities: revenue growth, as we've said many times now. And you can -- and as we've mentioned earlier today and earlier in the past few weeks, we now expect that our revenue for 2026 could reach about $4 billion based on the demand that you have been hearing today and all the great end markets that we serve. All of our end markets are doing well, are all improving year-over-year, with the exception of automotive, which is slightly down, but the others are making up for that.

Second priority, expanding profitability. With a $4 billion revenue growth or $400 million revenue expectations for 2026, we talked about Q1 and Q2, we're growing at about 30%. So that implies 38% growth for the full year. So that's going to show expectation of accelerated growth in the second half of the year. A lot of that, a key growth factor in that is the N+M technology that Rob and Doug just spoke to you about. That technology is kind of the next generation that will drive higher prices, higher ASP, and that will drive -- that will result in higher gross margins for us.

The other improvements in gross margin through the second half of the year will be a reduction in the Penang headwind that we spoke about. That should be less than 80 bps for the year and as well as continued operational efficiency. As we come up the curve on those new products, you're going to see product yield improvements as well, efficiencies there that will drive improved gross margins.

Moving down to the operating margin and EBITDA levels, you're going to see improved operating leverage as we continue to manage our operating expenses through SG&A management, what have you. So you'll see better expansion of our EBITDA and operating margins as well.

Third priority for the year, and as always, cash flow, generating cash flow that allows us to invest organically within the company as well as continue to maintain a strong balance sheet with low debt leverage, which allows us flexibility and liquidity as we go forward to look at potentially inorganic growth through strategic M&A.

To underscore that cash flow message, here's what we've been doing in the last 3 years. You can see on the left side, cash flow generation from operations, all the way on the right side, the CapEx that we've been able to expend over those 3 years. And in the middle, showing free cash flow has been positive for the last 3 years. We expect to continue to get slightly positive in the current year. I disclosed at our last earnings call, we've increased the capital expenditures for the current year to be $300 million to $320 million. We expect our cash from ops to come in about that same level or slightly above. So we expect to have some positive free cash flow.

But what we're doing, as you've heard today, throughout both of our segments, investing in organic capacity growth. So we've been able to do that and fund that through our own cash from operations. We've done that prudently. We've done that in a timely manner.

So on the bottom there, I've shown -- we always talk about CapEx. I have had other questions -- have had questions from time to time. This is just the cash we spend. But the bottom of the right there shows how much we approved in those years. So you can see that we're planning to spend $300 million to $320 million this year. We've approved $500 million, which means we've started ordering those, right? The cash follows because we have good payment terms to our equipment suppliers.

But if you look at that bottom, the total of what's been approved from 2023 through expectations for 2026 is over $1 billion, right? So we continue to spend at elevated levels, but prudently and timely to make sure that we can meet our customers' demands when they come.

And then as I spoke, strong balance sheet, low leverage. The debt market has been asking us to come and dip into them. So we are taking advantage of that. We're doing 2 different things right now. We're in the market currently to reprice and to upsize our current Term Loan B. So moving it from about $340 million to $400 million on upsize. So we're currently taking commitments on that. We are also trying to reprice that down from SOFR 225 to SOFR plus 175. So 50 basis point savings, which would save us approximately $7 million of interest savings over the remaining term of that loan. If completed, we expect to close that in June, early June.

Concurrently, we're also replacing our current ABLs. We have about $150 million ABL in Asia and $150 million ABL in the U.S. We're replacing that with a multicurrency class flow revolver. We're looking for commitments on that up to $1 billion. So significantly improving and increasing that revolver capacity from $300 million to $1 billion. If we get all the commitments on that, we close that, that's expected to close in June as well. So very good pricing on this in the market right now. Very, very happy to be serving -- providing lending to TTM at this point in time.

With that, I'll give you where we expect to hit -- where we expect to end up on 2026. So showing you our trajectory over the last few years, you can see quite a bit of improvement on the top line, we had 19% improvement last year. We went and said in January, we expect, and very confidently, expect to grow 15% to 20% over the next 3 years. You can see in the 2026 now, we're expecting to grow to approximately $4 billion. That implies about a 38% growth rate. So almost double what we said earlier in this year.

A lot of that driven by the very good strength in data center networking and our ability to spend capital equipment, spend CapEx, get it up and running very quickly. As Doug showed, those pictures are amazing to see how quickly we can turn a blank building into a production line and turn that into revenue. So very speedy and a great return, as he showed you, 10x over the length of ultimately when we get all that CapEx in.

So that being the case, you're going to see improved operating margins and EBITDA margins. The bottom line here, operating margin growing from 11.7% last year to a range of 13% to 15%. That is a 200 basis points improvement over what we said previously as our long-term targets, which were 11% to 13%. So we've achieved those and we have gone beyond those. We'll expect to get between 13% and 15% for 2026.

On the adjusted EBITDA margin, 16% to 18% is a 100 basis points improvement over our prior guide, which was 15% to 17%. The delta there is being driven this year by the weakening of the U.S. dollar. So we've got foreign currency losses this year. Those won't -- hopefully won't continue. But as far as what we expect this year, that's about 100 basis points impact on us. So that's why you're not seeing that 200 basis points improvement in EBITDA, but still good improvement year-over-year. And this is where we expect to end the year, very strong based on all the messages and the business end market stories that you heard today.

So that's the end of my guide for this year, and I'll turn it over to Edwin to give you some closing takeaways, and we'll take questions.

Okay. Thank you, Dan. It's such a pleasure, let's say, that today you were able to hear the story directly from the business unit leaders. That's such a great opportunity. Again, we see you quite often, but again, the story starts there.

What you also saw, I hope, is, let's say, a very coherent executive team, very, very, very solid. This reflects to the executive team. This reflects to the Board of Directors, same thing. We get a lot of good support there as well. And it reflects to all the 20,000 people we have on the payroll. So it's thanks to these guys who are able to show what we do. And again, Dan had the opportunity to show the $4 billion there. He didn't allow me to show them, okay? So that's great.

Having said that, one slide with closing remarks and hopefully some observations and then we go to the Q&A session. I was so happy, let's say, that during the break, we got quite some good questions on A&D, which is -- because I bet that 80% of the questions will go to data centers, but I'm so glad you guys asked questions about A&D. That's fantastic.

So the takeaways here. Hopefully, you saw that we have a very, very, very nice road map on PCBs, going to 150 layers, going to very complex construction, let's say, with N+M and all N+M [ to them], all these type of things happening. But besides that, on the interconnect side, also, let's say, advanced interconnect. So going to more heterogeneous packaging, going to, let's say, where we have optical components embedded, all these type of things are happening.

Then using that interconnect, we go fully vertically integrated. We use our interconnect solutions to make modules, subsystems and systems. Greg showed us that it's already 25% of the business right now where we use our interconnect and make modules and systems and subsystems. But that will grow, yes. Again, that wave will come down, and we better be prepared for that. So we have now the opportunity to grow, let's say, in these more complex solutions.

Again, I keep emphasizing that we need to be the technology leader, and we are the technology leader. And we have to make sure we invest in that and we do that. That's super, super important. So besides capacity, make sure we have a leadership position there. Again, we're helped by the megatrends, AI and the defense side, 80% of our business driven by these megatrends. Great.

Entry barriers. We love difficult stuff. I repeat it again. We love difficult things to do. And that gives us the entry barriers and that gives us our competitive edge.

And then last but not least, and Dan showed it already, the very, very strong financial performance. And now especially with the revolver and all these things happening, I think we have a lot of, lot of flexibility. So there's a lot of room to go. I really thank you again for supporting us over all these years and continue to support us. I thank you also for attending this session.

And we'll open to questions. As always, the simple questions come to me and all the more difficult questions come to Dan and the other guys. Thank you.

Terrific presentations from my vantage point, hopefully, from yours as well. I'm going to invite everybody who's been a speaker today to come up to the stage. And similar to a little bit earlier, so Cathie and Doug, Greg, if you want to come up. And we're now going to entertain your questions as we round out the session prior to lunch. And just actively look for us, raise your hand.

Similar format to earlier, please identify your name and who you're with. And what we'll do in this case, since we're at the end, we'll do one question and we'll do one follow-up question, okay? So that gives everybody an opportunity. Okay. All right. So I will walk my way back here.

Jim Ricchiuti with Needham. I feel like you've been talking about N+M for some time. And I'm wondering if you could speak to the competitive landscape for that technology. And maybe the follow-up, I'll jump the gun on it is, how do you see that playing out in your commercial business over the next couple of years as a percentage in broad strokes of your revenue?

[indiscernible] but the good thing with N+M is it started -- let's say, started it -- it started with switching. That's what most of the applications were. And you see it now being used, let's say, in other parts of the data center side, but also, let's say, in the medical and what we call M&I business.

So I'll leave it to Robert to talk about the competitive landscape. But I'm so glad that we are not only, let's say, one of the inventors of the N+M, but that we also are able to industrialize it and make it in large volumes. As Robert explained, these things tend to bend. That's very much of a difficulty. So we found solutions for that. So Rob.

The market -- the competition landscape is it's restricted. I mean there's only -- I consider there will only be a handful of actual active competitors. Now that doesn't mean that others aren't trying to get into it. But today, I think our customers feel comfortable with a select few, a select handful of manufacturers out there that have also developed the capabilities and brought in the capacity to support these franchise programs. So it's -- we're somewhat protected at this point.

And then, Rob, if you could just follow up, how -- on Jim's question, or Doug, what is a general perspective in terms of how this develops from here once we ramp beyond the third and fourth quarter? Any sort of color around that would be great.

From a capacity or...

How we ramp that piece of our business.

Well, so I mean, a lot of planning has got into it, bringing in the capital equipment, retooling these plants. So we have been very selective. I answered this question at the break. We've been very selective as far as programs that we have committed to. These programs are very large in nature. You have to make sure that you have the capacity allocated. And we've done a lot in the way of working with our ops team and understanding what it is we have the capability.

We have line of sight of almost 100% coverage by probably the middle of next year on projects we've already committed to. I would say we are holding some capacity because it's creating a lot of opportunities for customers that may not be a strategic partner today, customers that we might want to access into. And that's -- it's been interesting to have customers coming to us, knocking on our door, almost in some cases telling us that we have to take these projects.

So it's been a bit of a game changer, us being out in the forefront of this and putting us in a good position to not only fulfill that capacity by the middle of '27, but look at do we continue to add capacity and working with Jim and his operations team.

Jim, the only thing I would add is -- is this on? Can you hear me now? The only thing I'd add is I think certainly, this started, as Edwin and Rob said, in data center networking. But we're already seeing interest coming out of the instrumentation side of the business, where we see also have historically dealt with high-layer count applications. So we're looking for that to migrate across that MII business as well.

Steve Fox from Fox Advisors. I guess, Dan, first question from me. The latest guidance is implying 20% incremental margins, if I did my math right, and you guys have done much better than that the last few years. Is there any reason for that conservatism or other that is holding back the incrementals?

You're talking about on the EBITDA level, or -- I mean, like I said, we do have the headwind from foreign exchange that's impacting that. We do have yield expectations or yield performance we still need to execute for the second half of the year. So are you at the middle of that range?

Yes, yes, at the middle. And is there an assumption that you talk about around just sort of mix and pricing within that, that also drops to the bottom line?

I'd say mix and ASP. Revenue mix is what's going to drive the majority of it. And the higher we can -- the better we can yield N+M, the closer we will be to the higher end of those ranges, right?

And then I actually had another aerospace and defense question. Like if you guys are talking about high single-digit growth from that part of your business, from just listening to the presentation, there seems like a lot of opportunities for double-digit growth. I don't know if that's a time line thing, a visibility thing like or just the size of the markets. But where could there be upside, I guess, that we should maybe focus on, whether it's space or some of these neo-primes where you can maybe drive even better growth in the next few years?

Yes. I think it's a great question. I appreciate it. The important thing to understand about the defense side, it takes time to qualify these products. And we are a bit dependent on the DoW's acquisition timing and process. So we see the demand signals. We're responding to those in terms of standing ready. But a lot of that timing truly does depend on the defense side on when those procurements are going to make their way through the system.

I think on the space side, I was talking about this with one of your colleagues, but one of the things that's important about the opportunity we have in space, especially in commercial space, is the decision-making and the attitude that the commercial space companies take when it comes to where they have to buy their manufactured product from. So the types of products that TTM is manufacturing here in the U.S., and our A&D business really anchored out of the U.S., a number of the commercial applications can still be procured for now outside of the U.S. There is a lot of focus on national security infrastructure, U.S. infrastructure and what the implications that might be. We're watching that very closely.

So there's still some decision-making, I would say, that has to happen in the part of the commercial space primes in terms of how they are going to procure, and that will directly impact what our ramp-up looks like. We know it's coming. It's just a matter of what does that time line look like for them.

It's Will Stein from Truist Securities again. I think the last time the company offered a big update for investors, I think, was around January, and you talked about 15% to 20% top line for 3 years and then a doubling of EPS in 2. And now today, we're getting an update on '26. I'm wondering when we think about growth in '27, '28, et cetera, can you help nudge us in the right direction for contemplating total company revenue growth and margin expansion as we go forward?

Well, let me start and then hand it over to Dan. So first of all, I think that 15% to 20% is still very accurate going forward. Hopefully, we do better, as always. But 15% to 20% is still pretty accurate and also, let's say, doubling the earnings from 25 to 27 is also still very accurate. There's a lot going on, and you see how well we are positioned. So we'll see. We'll see.

And as always, we give -- every quarter, we give, let's say, our best outlook for the quarter. By the way, only since the couple of months we decided now to give full guidance for the year. So that's a big change for us. Remember, we did only the next quarter. So that's going well. But for now, we stick to, let's say, the 15% to 20% for the coming years, and again, the doubling from 25 to 27. And as always, we push and we -- you see how well we are positioned. So if things change, then you -- as a good analyst, you are one of the first to know.

One follow-up, if I can. It's actually a different topic. Edwin, you've been with the company, I think, less than a year still, and it's a very exciting growthy time, a lot is changing. I'm hoping you can talk a little bit about the company's culture. You come from a very different company. Maybe talk about the aspects of the culture that you were either positively surprised by or things that are very supportive of change and growth. And then maybe if there's anything that you've had to change, we'd love to hear about that.

First of all, I think the company where I came from, I was 20 years in Teledyne, as you know, is the culture was pretty similar, I would say. It's a high-tech company and we do a lot of good high-tech stuff. But there are also some very nice things in TTM.

First of all, and I mentioned it during the closing remarks, it's a very, very nice team to work with. And this is not only valid for the leadership team here, but also if you go a few levels down, it's still that same culture, very, very cooperative. There is no politics in the company, okay? So that helps a lot.

So regarding culture, we didn't have to change a lot. I always say we, I don't say I, okay? So we didn't have to change a lot. The culture was there. There is, let's say, each of the plants have their own ambition to grow. It almost feels like families. But at the same time, we have what we call the One TTM. So they work together in a very, very nice way.

So again, the culture was already there. We just continue it. The only thing what we emphasized a bit more is R&D and innovation. So these are the things we, I think, are putting a bit more on the priority list. Again, you have to be the technology leader. The capacity story is going very well. I like how Doug explained it with, let's say, the brownfield and the more, let's say, cautious way of adding capacity and that these are things we were already there. So again, it was just for me, a nice continuation and it's an amazing story here.

Sahej Singh from Stifel on behalf of Ruben Roy. Dan, maybe 2 questions for you. The first is around the $1 billion revolver and the upsized debt. That's a war chest. You guys are not unfamiliar with M&A, as we know. And you're also talking about CapEx expansion in 3 tiers between greenfield, brownfield and expansion. And so as we think about this balance sheet that you're now in charge of, how do we think about that as dissected via M&A, CapEx and any other capital allocation priorities?

Sure. Yes. Thank you for the question. As I showed, I think we're mostly wanting to fund our internal investment, our organic growth through our own operating cash, and we've been capable of doing that. So that was the signal that the war chest, as you put it, is most likely going to be used for M&A. We have a very active pipeline.

You saw a globe that turned around that showed Europe, and my boss seems to want to be there, if you haven't heard that. So certainly, there are opportunities we're looking at for geographic expansion as well as some bolt-on strategic M&A. So that is why we want to go to the debt markets and increase that flexibility.

And I'll let the colleagues sort of follow up on M&A specific. The other question I have is a bit of napkin math on CapEx I think you put up a number, which is $450 million from '25 to '27. And I think your last 12-month CapEx to sales ratio is a little above 10%. Historically, you've done about 6%. Your $310 million on $4 billion for this year is about $7.75 billion. So what's the historical norm for your CapEx to sales? Where do you hope to land, especially as we start thinking about '27, '28 and all to come?

Yes. I'd say through that period, you just mentioned through '27, '28, we'll probably continue to be at between 6% and 7% of revenue, with growing revenue. So a growing dollar amount, but we'll probably stay within that 6% to 7%, which is higher than our historical, which is about 4% to 5%.

Drew Morton from Rivermont Capital. I had a 2-part question. First, you guys kind of talked about the $500 million in CapEx that was approved versus the $300 million that you're spending this year. Can you maybe help us understand the difference between those 2 numbers? And then I guess second question, just how should we think about revenue generated per dollar of CapEx or kind of like an ROI on the CapEx that you're spending?

So yes, the reason I put that up there is to the approved number versus the capital expenditures is some of our equipment, we have terms -- we maybe pay 25%, 30% deposit upfront. We may have a payment somewhere in the middle, but then mostly we pay the rest after a year. So our cash flows lag quite a bit, the ordering and delivery of our equipment.

So a signal to why -- and I've mentioned to quite a few of you, our revenue growth through the first half of this year and then acceleration to the second half, largely due to purchase of equipment that we made orders on the end of last year. And so that was just a signal to show you there's more equipment still that's on order that's coming in that we haven't paid for yet. So the cash flow will lag into next year. But the capacity will be here, right?

And then your second question was around -- yes. I mean I'm not -- frankly, look, I think what Doug showed you gave basically a 10x on that $450 million, right, generated about $4.5 billion of revenue for data center and compute over the 3-year period. So I think that's maybe not a benchmark for every CapEx, but the signal there was that what we're doing, right, if you're doing a green -- we talk about greenfield, brownfield and then we're adding capacity, we're adding drilling machines and plating lines to existing facilities that we have, that has a very quick turn, right? That is generating 10x over the next 3 years. Because we're not having to build buildings, we're not having to fit out new buildings. We're adding equipment to existing facilities. We have an existing workforce who knows how to run these equipment and turn that into revenue very quickly. So I'll just stick with that example, but that -- which is the growth part of our company.

Jim Ricchiuti with Needham. A follow-up question again on capital allocation. Has your thinking changed at all with respect to the Eau Claire facility, when you might be installing equipment, how to think about eventually that business scaling in that facility?

Jim, yes, I think we never had a specific start date in mind with that. It was a proactive move. We firmly believe that, that demand will come. And it's going to be driven by a number of different drivers, if you will. I mean there'll be a certain aspect of that will come from the customers themselves in terms of how they view their strategies on regional diversification, what they think they need to do in terms of China plus strategies. Another aspect is going to be possible signals that come from the government in terms of certain type of work that may need to be produced, if not in the United States and outside of China. So there's a variety of factors that we're experiencing as we talk to customers.

I think the other factor that's in the background is just the need for more advanced tech capacity. And we've made it very clear that what we do do within the realm of commercial sector, not to say what might happen in A&D, is that factory will support advanced technology, and that factory will support the innovation center I mentioned.

So when you look at the commercial side, these customers are always driven first -- largely driven first by cost. They don't make the move until they think they have to. But I can tell you that we're seeing increasing interest in the fact that we've got that asset, and they appreciate and understand the point I made earlier that a factory like Eau Claire can be converted into capacity and revenue for them much more quickly than a greenfield. So we're very optimistic about it. Still don't have a definite exact time frame to share today.

Okay. And Edwin, a question on M&A. And I know you can't be specific, but the previous 2 acquisitions the company has done has been in the defense area. And certainly, [ Anaren and Telephonics ] are good acquisitions. Can you give us a sense as to how you're thinking about, particularly with respect to Europe, opportunities on the defense side versus the PCB side, which the company hasn't done for a while?

Jim, typically, we always look, let's say, at -- on the PCB side, let's say, the interconnect side, we're looking at how much more global we can get. So I mentioned before that Europe is very interesting there because -- and maybe it starts with A&D because remember that if you want to provide A&D solution in Europe, there needs to be 60-plus percent European content. So that could be a very attractive angle.

The other thing is everything up the chain, and that's more than A&D. At the moment, our IE business, what Greg described, is defense, but there are more angles there to that as well. So up the chain and a better coverage, let's say, even better coverage on PCB. These are the things you should think of.

There's no other questions, I'll ask a follow-up. Again, Ed Singh from Stifel on behalf of Ruben Roy. During Cathie, during the MD section, you're talking about contract terms and the change in procurement cycles. Similarly, we're seeing that in data centers, and we're hearing from across the supply chain, how visibility is changing and how contract terms are changing. Color there would be helpful on both sides.

And Edwin, maybe for you specifically, excluding co-op on the data center side and to the degree you can talk about aerospace and defense or Cathie can, do you take the over or under on 4-year visibility for customer road maps?

Let me first go to Cathie and then, Doug, you can answer the data center.

Yes. So let's see if I can parse your question. So from an aerospace and defense perspective, looking at sort of changes in contract terms, I think I would characterize that just a little bit differently.

So what we're seeing in the slowdown from our customers and in the sort of narrative that's coming out of the DoW is a streamlining and accelerating of acquisition. At the same time, what we're also seeing is a recognition on the part of the DoW and the primes that they need to telegraph a longer signal to shore up the defense industrial base. So in and amongst that is this attempt to streamline acquisition process to try to get contracts into the hands of the DIB, the defense industrial base, quicker. And in certain cases, longer contracting versus sort of more transactional. This is what the defense industrial base needs, and there is a response happening there. But it still takes time. This is still the defense acquisition process, right, that is really driving the timing of these contracts.

So I think that's the change, right? There is an acceleration. There's a push. There's a longer duration coming because of the signal that needs to be sent through to the supply chain, and we are getting those indications. And there are certain types of contracting that are able to happen more quickly and remove some of the burden of administration from the administration. And so those are all sort of flowing through.

The other part that you asked in terms of advanced packaging, can you give me just a little bit more of a sense on that question?

Four years for visibility. Is that -- over 4 years or under 4 years?

Yes. So we spoke about it a bit during the break, correct? So the thing is, yes, we have a good idea where things are going. And we are, let's say, exploring different directions as well. Each of these solutions have their own complexity, and Doug showed some things regarding co-op.

Yes, we have some very, very unique IP. Now is the time, let's say, to write down the IP. Some things are patents, some things is know-how basically. We have to defend our position there. But I can tell you, we're exploring in different direction there. And the visibility, yes, take any [ old ] report or any other report here, you see where things might go. But it's like all these things, you have to be extremely flexible. Yes, the products you have today might change next week because of different insights. So that's the visibility we have on that R&D.

Okay. And then on the commercial side of the business. So notwithstanding the automotive, which is a highly contractual business, historically, our other commercial markets, contracts have been more in terms of general framework agreements. I can say without getting into specifics that, in the current environment where capacity is more of a concern at the moment than it's been in the past on some of these advanced technologies, we are engaging in customer conversations focused around long-term agreements for capacity guarantees, engineering engagement so that you're gaining visibility to longer-term road map views and executive level engagement.

So a little more formality being discussed now in these other commercial markets with some of the bigger customers than we've seen in the past. That's certainly very interesting to us and something that we will pursue appropriately.

I guess we're doing follow-ups. It's Will Stein again from Truist. Okay. I'll do it a little louder. One of the numbers that stuck out to me in today's presentation was a 9% share in the data center or data center networking, as you call today. I'm very curious as to what portion of that TAM is not only addressable by you but attractive to you.

In other words, when you only have 9% share and you're one of a small number of companies that can address that market, it suggests quite a bit of upside if you were to sort of go for it and add the capacity. But maybe a lot of this is business that's actually not all that interesting from a margin perspective. So I'm hoping you can maybe talk us through that, please.

It's a good question. I would say looking at the 9%, you're looking in the rear. As we look to the future, there's an opportunity for that to grow within the context of the technologies we're focusing on. You are right, not everything is super attractive to us from a technology standpoint. So we have been very diligent in the technologies that we've approached. That's what we plan for. That's what our customers are coming to us and saying they need most.

So as we set it up, we want to be very careful and very deliberate on what we -- the type of business we go after. And there could be growth in there. There could be decline because other technologies around it are growing a little bit faster in areas that we've elected not to invest. So hopefully, that answers your question. Doug, do you want to add to that?

Yes, I'll just say I think you're touching on the right point, Will. I mean we're being very purposeful when we use the term serviceable available market. We're looking at all of our capability and what we could support if we wanted to. There's a lot of commodity business in that number that's just not attractive to us. And I think that's probably the main reason that number is as low as it is.

A follow-up because, why not? You talked a little bit about optical communication on printed circuit boards, which I don't think we've heard you guys talk about in this forum anyway. Currently, I don't have a great understanding of that market, but I perceive there to be 1 or 2 very big global suppliers of fiber optic cable. And the idea that this could be just easily sort of built up into a printed circuit board transitioning from what copper clad laminates to what is it a glass laminate? How does that work? What does that look like? Can you help us -- for those of us who aren't creative enough to imagine it, can you help paint a picture for us?

Let me start and then hand it over to Doug. So well, first of all, data centers, they hate cables, okay? So they hate cables. So if you look at fiber solutions, they sometimes are not the best solution. So you see that we have already, let's say, we showed some real pictures, and this is real, of, let's say, our waveguides in our PCBs.

The other thing we are doing well, we are very close with some of the component suppliers and solution suppliers in the optical domain. So you can imagine the companies [indiscernible] the [ Coherents ] and [ Lumentus ] of this world. So we're very close to these guys as well to try to get to that, let's say, the most optimal solutions.

It's always a question, let's say, what will win. I think the very nice slide Rob showed regarding copper, copper is not going away, okay? It's not going away soon. So that will stay there. The other thing is, let's say, how we can be, let's say, add our optical knowledge and our optical solutions to be complementary to that copper solution. That's basically the way we are aiming at.

Do we have a lot of color right now on where that's going? No. But we are, let's say, showcasing some of these solutions to our customers. So what we don't do is, with our customers, we go just with PowerPoints. We go with real prototypes, let's say, these waveguides. We go with components on top of these waveguides. We look at coupling. We look at, let's say, on [ reflow ] possibilities in -- with these same components. Optical components, you can hardly reflow. So you have to look very close to your industrialization to see what you can do there.

This is just a few of these challenges we have. But again, we have time to bring that forward. That's where we are.

I think Edwin summarized it nicely. And I think in terms of trying to envision it, think about integrating the optics into the board. And that's really what our engineering teams, our R&D teams are exploring with customers because it hasn't been done up until now. So it's that as well as co-packaged optics and things like that on the board that can fit into that slide that Rob described. It's evolving, but we're getting more interest, and we're certainly building up our R&D staff to support it.

Okay. Any other questions? No? Okay. Yes, we do? Great.

Just in terms of the 15% to 20% CAGR over the next 3 years and in light of the strong growth this year, how do you think about the implied '27, '28, just given the opportunities ahead? What sector should still be driving that, especially with the ramp we have going on in asymmetric boards? Any more color we can get on that would be super helpful.

Yes, that's basically repeating my answer. The 15% to 20% is still pretty accurate. There's a lot going on. There's a lot in our control, there's a lot outside of our control. So for now, the 15% to 20%, and as we always did, every quarter, we give a nice update where we are, and that's probably the best answer I can give right now.

Okay. Well, folks, I think we're at a point now where we can probably conclude the webcast, conclude the presentations and Q&A. Hopefully, you'll have an opportunity to join us for lunch. We're going to have our team here and available for you, certainly distributed around the room as well as in this breakout room outside.

So thanks again. And if you can just join me with a quick applause for all of the presenters here today. They did a terrific job. So thank you.

Good day, and welcome to the TTM Technologies Q1 2026 Earnings Conference Call. [Operator Instructions] 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.

Greetings, everyone. Welcome, and thank you for joining us today. I'm Sean Hannan, Vice President of Investor Relations for TTM. With me on the call are Edwin Roks, our President and Chief Executive Officer; and Dan Boehle, our Executive Vice President and Chief Financial Officer. Before we get started, I'd like to remind everybody that today's 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. We will also discuss on this call certain non-GAAP financial measures such as adjusted EBITDA. A -- 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 reconciliations between GAAP and non-GAAP measures included in the company's in release, which is available on the Investor Relations section of TTM's website at investors.ttm.com. We have also posted on the website and earnings presentation that we will refer to during our call. Here is Edwin.

Thank you, Sean. Good afternoon, everyone and thank you for joining us for our first quarter 2026 conference call. At TTM Technologies, we are focused on designing and manufacturing complex products and solutions in 2 strategic directions. The first is advanced interconnect, which includes highly complex printed circuit boards, substrates and advanced packaging. The second strategic direction built on our advanced interconnect technology to design and manufacture sophisticated modules, subsystems and systems. Examples of this include our RF modules, thermal and power management systems etch and AI processing products as well as complex subsystems and fully integrated mission systems.

We believe the future of electronics lies in speed to market, high reliability and efficient technology interim. The markets in redo business continue to demand highly complex technology solutions in an increasingly compact size and footprint. Our strategy is to stay at the cutting edge of advanced interconnect technologies through innovation and continue to move up the value chain into complex modules and subsystems that combine sensors, actuators RF and Photonics. We engaged early with our customers to ensure alignment on product development and speed to market while also enabling optimal management of their complex supply chains.

From a demand standpoint, we are experiencing healthy multiyear tailwinds due to our participation in 2 key megatrends currently driving economic growth, artificial intelligence and defense. We previously stated that approximately 80% of our net sales are related to these 2 megatrends, and that this puts us in a unique position to benefit our investors. Our ability to seize these organic growth opportunities requires our continuous focus on technological innovation as well as expanding our capacity across our strategic footprint. We are further investing capital and resources to take full advantage of these opportunities today and in the future through our global footprint, which offers our customers manufacturing options across 24 sites located in China, Malaysia, Canada and the United States.

We stand well positioned to support this growth across our end markets, and we are tracking well ahead of our previously communicated plan to grow revenues 15% to 20% per year for the next 3 years and to double our earnings from 2025 to 2027, which were closed that were reiterated on our February 4 earnings call. In our commercial segment, we are highly focused on supporting the demand wave of artificial intelligence in the data center and networking end markets where customer demand has materially accelerated. We are also focused on evolving opportunities in the use of automation and AI in our medical, industrial and instrumentation end markets, while we remain strategically positioned in automotive where our highly valuable solution designs are positioned to benefit from competitor consolidation and have additional transfer application into other markets. In our airspace and defense end markets, we continue to excel with our leading position in advanced interconnect products and we work to expand our product offerings in indicated and electronics, including modules, subsystems and full mission systems.

Recently, we were proud to be a participant in the success of Artemis-I mission with our microelectronics, PCBs and assemblies for both the space large vehicle and the Orion crew capsule. As for this, current state of the defense budget as well as the geopolitical environment considering the conflict in Iran, our solutions are ever present in the categories of advanced radar systems, advanced gaming systems, missiles and decoys, electronic surveillance systems and satellite and ground-based communication systems.

In the commercial aerospace market, we recently won an award from an innovative electric autonomous aerospace company for light passenger travel to provide the sense and the void radar system for their autonomous aircraft. I'll now begin with an overview of our business highlights from the quarter. Then we'll follow up with a summary on our Q1 fiscal 2026 financial performance and our Q2 and fiscal 2026 guidance. We will then open the call to your questions. We delivered an excellent first quarter of 2026, and I would like to thank our employees for delivering these results. We achieved sales of $846 million and non-GAAP EPS of $0.75 per diluted share, both above our guidance issued in early February and both all-time quarterly highs.

Sales grew 30% year-on-year, reflecting continued demand trend in our data center and networking end markets driven by the requirements of AI while our medical, industrial and instrumentation and aerospace and defense end markets also experienced strong growth. The company adjusted EBITDA margin was 15.7% in the first quarter of 2026 compared to 15.3% in the prior year, largely reflecting positive mix impacts. Non-GAAP EPS of $0.75 per diluted share was a 50% improvement year-on-year. The aerospace and defense end market represented 40% of first quarter 2026 sales. Sales in the Aerospace and Defense market grew 11% year-on-year for the first quarter. The sales growth in defense market continues to be a result of positive tailwinds in defense budgets, our strong strategic program alignment and key bookings for ongoing programs.

During the first quarter of 2026, we saw significant A&D bookings related to the Alteams Air Defense Radar, APS 153 maritime surveillance radar and a transportable radar safaris system for ballistic missile detection and tracking. In addition, we continue to see an increase in bookings for respective programs and we also have first booking that was confirmed to support Golden Done. A&D book-to-bill was [indiscernible] for the quarter, which led to a program backlog of $1.6 billion, similar to a level a year ago. We expect second quarter 2026 from this end market to represent [indiscernible] 36% of our total sales, while still delivering both year-on-year and sequential growth.

Sales in the data center and networking end market represented 36% of our first quarter 2026 sales. This end market experienced 61% year-on-year growth in the first quarter above our growth expectation and reflecting continued demand strength from our data center and networking customers, building out the AI data centers. For the second quarter of 2026, we expect this end market to represent 42% of net sales. The medical industrial instrumentation end market represented 16% of the first quarter 2026 sales. This end market saw a year-on-year growth of 61% during the first quarter aided by healthy demand of AI-enabled robotics in medical, automated test equipment for AI applications in instrumentation.

A notable example when in the quarter was for a major continuous glucose monitoring customer products with our involvement on both the current and next generation, which will feature a materially smaller footprint and more powerful performance. For the second quarter of 2026, we expect medical, industrial and instrumentation end markets to represent 14% of total sales, growing both sequentially and year-on-year. Automotive sales represented 8% of the first quarter of 2026 sales. We continue to be very selective in this market to focus on higher value-add products that carry margin profiles consistent with our financial goals as we also believe long-term business cycles should migrate back towards advanced capabilities.

We are also supporting our Tier 1 automotive customers as they transition some of their more advanced capabilities towards products, in ancillary end markets. We expect the automotive end market to represent about 8% of our total sales in the second quarter of 2026. The overall book-to-bill ratio was 1.41% for the first quarter of with the commercial reporting segment at 1.65% and the A&D reporting segment at 1.10%. At the end of the first quarter of 2026, the 90 days backlog, which is subject to cancellations, was $787 million compared to $517 million a year ago. Now then Bailey will summarize our financial performance for the first quarter. Dan?

Thanks, Edwin, and good afternoon, everyone. I will review our financial results for the first 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 first quarter, our net sales were $846 million compared to $649 million in the first quarter of 2025. The 30% year-over-year increase was due to continued strong growth in our data center networking, medical, industrial and instrumentation and aerospace and defense end markets, partially offset by a more modest than anticipated decline in our automotive end market.

GAAP operating income for the first quarter of 2026 was $72.4 million compared to comp operating income for the first quarter of 2025 of $50.3 million. On a GAAP basis, net income in the first quarter of 2026 was $50 million or $0.47 per diluted share. This compares to GAAP net income for the first quarter of 2025 of $32.2 million or $0.31 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 compensation, gains on the sale of property, unrealized gains or losses on foreign exchange and other unusual or infrequent items. We present non-op financial information to enable investors to see the company through the eyes of management and to facilitate comparison with expectations in prior periods.

Gross margin in the first quarter of 2026 was 22.3%, an increase of 150 basis points from 20.8% in the first quarter of 2025. The year-on-year increase was due primarily to higher sales volume and favorable product mix, particularly in the data center networking and aerospace and defense end markets. Selling and marketing expense was [indiscernible] million in the first quarter or 2.8% of net sales versus $20.3 million or 3.1% of net sales a year ago. First quarter general and administrative expense was $49.3 million or 5.8% of net sales compared to $38.9 million or 6% of net sales in the same quarter a year ago. Our operating margin for the first quarter of 2026 was 12.8%, a 230 basis point improvement from 10.5% in the same quarter last year.

The increase in the period was due both to the improved gross margin as well as operating leverage resulting from selling, general and administrative expense discipline. Interest expense was $10 million in the first quarter of 2026 compared to $10.9 million in the same quarter last year. Interest income was $2.5 million in the first quarter of 2026 compared to $3 million in the same quarter last year. Realized foreign exchange and other nonoperating income and expenses in the first quarter of 2026 totaled a net expense of $6.8 million as compared to net income of $1.5 million in the same quarter last year.

The increased expense was driven by the weakening of the U.S. dollar, which resulted in a $7 million foreign exchange loss in the first quarter of 2026 as compared to a $0.9 million gain in the same quarter last year. Our effective tax rate was 14.5% in the first quarter of 2026, resulting in a tax expense of $13.6 million. This compares to an effective tax rate of 15% or a tax expense of $9.3 million in the same quarter last year. First quarter 2026 non-GAAP net income was $80.1 million or $0.75 per diluted share. This compares to first quarter 2025 non-GAAP net income of $52.4 million or $0.50 diluted share. Adjusted EBITDA for the first quarter of 2026 was $132.9 million or 15.7% of net sales compared with first quarter 2025 adjusted EBITDA of $99.5 million or 15.3% of net sales. Cash flow provided by operating activities was $21.7 million in the first quarter of 2026, despite the increased net working capital supporting our continued revenue growth. This compares to cash used in operating activities of $10.7 million in the same quarter last year. Free cash flow in the first quarter of 2026 was a net usage of $85 million as compared to a net usage of $74 million in the first quarter of last year both periods reflecting increased capital expenditures in support of organic growth opportunities.

Now I'll return to our guidance for the second quarter of 2026 and a directional outlook for fiscal 2026. We project net sales for the second quarter of 2026 to be in the range of $930 million to $970 million and non-GAAP earnings to be in the range of $0.82 to $0.88 per diluted share. In addition, considering the current demand dynamics reflected in our first quarter results and second quarter guidance, we believe that the net sales growth trajectory in the first half of the year should continue in the second half. The second quarter 2026 non-GAAP diluted EPS forecast is based on a diluted share count of approximately 107.5 million shares, which includes the dilutive effect of outstanding stock options and other stock awards.

We expect SG&A expense to be about 7.4% of net sales in the second quarter and R&D expenditures to be about 1% of net sales. We expect interest expense of approximately $10.6 million, interest income of approximately $2.5 million. and realized foreign exchange and other nonoperating expenses of approximately $6.9 million. We estimate our effective tax rate will be between 13% and 17%. Further, we expect to record depreciation of approximately $32.1 million, amortization of intangibles of approximately $9.2 million, stock-based compensation expense of approximately $11.5 million and noncash interest expense of approximately $0.5 million.

Finally, I'd like to announce that we will be participating in the Barclays Leverage Finance Conference in Austin, Texas on May 19 and the B. Riley 2026 Investor Conference in Los Angeles, California on May 20. In addition, we will host an Investor Day on May 27 at the NASDAQ Exchange in New York City, as announced in our press release last week. That concludes our prepared remarks. Sherry, will turn it over to you for questions.

[Operator Instructions] Our first question will come from the line of Steven Fox with Fox Advisors.

Great. I had 2 questions, if I could. First of all, I was wondering if you could maybe discuss the current interest you're seeing from your customers in bringing business into the UK facility as you ramp it? What kind of customers are looking at the facility and maybe how have the discussions progressed versus a year ago? And then I had a follow-up.

Yes, happy to answer your question. If you think about Once, I think we're making really, really good progress there. we are identifying, let's say, our anchor customers like we did in Penang. So that's going well. a core team is identified to see what we're going to do. As you remember, probably remember, it's about 750,000 square feet, and we have basically 3 modules. So we can use them for both our commercial business or our defense business, and we're very flexible with that. So we're identifying the customers right now. We have, of course, our supplier agreements in place. We have -- we are dealing with our equipment centers. So that's going well. And what I really like in that site as well is that we are going to build an R&D center, which is not only, let's say, providing capacity for our customers but also being very close with them on new R&D developers.

Great. That's helpful. And then as a quick follow-up, can you give us your latest thinking around the impact of higher oil prices on laminate costs and how that flows through your income statement in coming quarters? .

Yes, Steve. So it's Sean Hannan here. So we did have some conversations within the company here and what we're observing within our supply chain and suppliers we are observing some pressure in the supply chain environment as is the rest of the industry and that can relate certainly to lead times and to pricing, but we don't think it's restricting our ability to reach our goals. In terms of a derivative specifically due to oil pricing, that's not something that we're currently observing through our questions.

Out next question. And that will come from the line of Jim Rashidi with Needham & Co. .

Just wanted to focus on the growth you're seeing in the Davis Center networking portion of the business. Is there a way for you to give us a sense of how much of that is volume driven versus price? And when I say price, I guess there are 2 components to that, right? They are the higher ASPs for the more complex forwards and maybe just higher pricing in general. So I'm just wondering if you can maybe drill down a little bit more on that. .

Yes, Jim, actually Happy to do that. And again, good to meet you again. First of all, I think if we -- before we get to the ASP and the volume aspects let's go back to the visibility first. I think our visibility is still, let's say, for normal order still within the quarter. As you know, we are doing some larger order for larger players here where we have a visibility of, let's say, a year. And we still have our strategic alliance with the stop customers. And these are, let's say, in the multiyear regime. That is, let's say, the whole point with respect to complexity.

These boards are getting more and more complex. We spoke in the past about the number of layers. We can go to 80 layers. We had 100 players, even 140 layers, which is really the summer. And then, of course, we have these atomical panels as well where we distinct the power from the signals. So that's going very, very well. because of that complexity, our ASPs are going up, let's say, a factor of 4, maybe a factor VIII. But I hate to talk about ASP because it's basically the complexity. It's basically the complexity of what's going on -- then the volume aspect of it, yes, there is more volume. There are more panels. But also if you look at volume, if you want to create a more complex panel, you need more cycles in the facility to build that panel that's also a volume aspect.

So if you -- let's say, bottom line, bottom line, if you look at ASP versus volume, yes, it's mostly ASP, but it still has a big effect on the facility because complex panels require more cycles in the facility. Hopefully, that answers your question. .

It does help. And maybe 1 quick follow-up. I'm wondering if you can give us an update on how the ramp is going in Penang. And Dan, maybe if you can give us some sense as to what kind of a headwind it might have represented in the quarter and how you see that unfolding in Q2 in the second half?

Yes, yes, one, absolutely. I'm very happy with the performance [indiscernible] yields, let's say, are improving a lot. If I look at these anchor customers, and I pick one of them, there we are seeing yields, let's say, in the past, we saw yields above 40% last quarter. Now we are seeing it closer to 70% and 80%. So that's going very well. In the past, I would say a year ago, we disclosed some of the breakeven numbers. I can tell you, we were getting very close to that number. So I will be very surprised, let's say, in Q4 and hopefully earlier, we are in a breakeven situation for Penang. So that's going well. We spoke about the headwinds of 160 basis points, bringing that back, so let's say, in half to 80 basis points headwind for the full year. we're still on track there. And again, we hope to do better. So again, we changed the team. I was at myself, by the way, a few weeks ago. It is going very smooth. It's a highly automated facility, so yes, I'm very positive, Jim, about that situation there.

And then just to clarify, when you say an anchor customer, is that an anchor customer in the data center networking area.

It is but in that facility, we also do a lot of medical industrial instrumentation business. But in this case, I was talking about one of the data center networking players, yes.

Next question. And that will come from the line of William Stein with Truist Securities. .

Congrats on the great results and outlook. First, I want to ask something about data center networking, can you help us understand the your size in that market relative to the market overall because most of this market really has served out of Asia. I think there are many investors here in the U.S. who might not appreciate you may not be the biggest. And so it highlights the potential for significant growth, maybe almost you can take whatever you can build to. Can you maybe characterize that?

And then the other question I had was about the exposure or concentration in that end market relative to the various GPU or TPU type customers and the other hyperscaler customers. Maybe talk about the dispersion of -- or the customer concentration.

Yes. Thank you, Will. These are really good questions. So first of all, your first question, if you look at the size of the market, that's always a big that's always a bit difficult to define, correct. It's -- the spend, let's say, in all these data centers, about 75% of it is still in hardware, which I really like. It's the energy component, and it's basically what we do is the interconnect. Yes, we are the nervous system, as you know, of all these interconnects putting all these chips together. The market overall is a bit difficult to define in that sense. But I can tell you, we play in the high end of that market. So everything what has to do with, let's say, more than 40 layers. And like I said in the previous question, [indiscernible] high complexity, very small pitch. That's where we play in. If I look at our competition, so thinking about Giant, thinking about boosting and micro and others, let's say, we are in that top 4. There is a lot of demand and we are in that top 4.

Some of the, let's say, innovations, some of the innovations we did, let's say, I'm talking about emplozem, which is, for instance, the asymmetrical boards where power is on one side of the board and signal the other side of the Board, we basically transferred some of that IP to our competition to be able to make sure that we can supply a whole business. So the whole landscape is, let's say, 5, 6 layers where we are in the top 4. That's about the situation.

Of course, we have a pretty unique situation here. We are a U.S. player that also means that we are very flexible with our location perspective what the customer wants. We can, if you want the process in China, we do that. We have 5 facilities in China. We have a facility in Malaysia, if you want, China plus 1 but if these customers want to be in the U.S., we have 16, 17 sites in the U.S. supporting this. So that's basically what's happening.

Then related to your second question, regarding GPU, TPU XPU, whatever you want the PU. I can tell you we're agnostic. We're agnostic for that particular situation. Even if it goes to Quantum processing, QPUs, there is a lot of conventional processing required after quarter -- so there is always a need for these boards. These boards for whatever customers are very, very, very similar. And the complexity is fairly similar. So I'm so happy to say that we are very agnostic for that situation. Hopefully, that answers your question.

Our next question. That will come from the line of Mike Crawford with B. Riley Securities. .

Within your aerospace and trans vertical, how much was commercial? How much was space? And where what do you expect to see space in the future, especially as compute migrates to Leo Geodis linereven loom based space?

Yes, Mark, that's a very clear question. If you look at the aerospace and defense and by the way, you probably saw in the earnings that we did move our commercial space business from our commercial through the Aerospace and Defense group. And we did that for a reason because there is a lot of synergy between these businesses and it's much, much easier to put it in their own business. So that's what we did. If you look at, let's say, aerospace and defense, the breakdown is about 50% of the aerospace and defense business and that can be printed circuit boards can also be up to chain what we call the chain, let's say, all kinds of modules or subsystems or systems it's about 50% radar related.

Then we have about, let's say, 25% communication, mostly communication related, some guidance systems, these type of things. Below the smaller fraction here below 10% is munitions. That's, by the way, that's where I expect a lot of upside in the coming periods. And then 5% only 5% -- currently, 5% of our business is space. And I agree with you, there is a lot of room to maneuver. There's a lot of potential, especially with our radiation heart designs and all the other things we do. So space is absolutely in the area of focus area, but currently, it's only 5% of our business.

Okay. And then switching gears. CapEx was high at $107 million in Q1. Can you just provide any updated thoughts on where that might fall out this year and next, and that's assuming that you are not only ramping in China and Malaysia and Syracuse, but also clear.

Yes, Mike, I'll take that question. So we -- you'll see in our 10-Q when it comes out, we disclosed the CapEx forecast for the year. It was originally about $250 million -- $240 million to $260 million. We're increasing that to $300 million to $320 million is the range that we're currently looking at. So we've accelerated some of the capital expenditures that we talked about for Asia as some of the lead times on equipment we're starting to get indications that those would -- would start stretching out. So we got our orders in early. We were starting to really get some of that equipment in a little bit quicker we've had to pay deposits for that. So that's why the cash expenditures have been up a little bit higher.

But as you can see in our numbers, it's also generated fast revenue for us. So we've accelerated some of that $200 million to $300 million of CapEx that I said we were going to expand in Asia.

Our next question and that will come from the line of Ruben Roy with Stifel.

This is Fed saying on for Ruben. Look yesterday, one of the major EMS guys reported. And then you made mention of challenges in 40-plus layer PCBs and sort of sourcing them. We've already talked about price leverage. It sounds like you have that headwind. Correct me if I'm wrong, I think I heard you say [indiscernible] on that. We're talking about volumes via the accelerated CapEx ramp, which sounds perhaps tied to the anchor customer. Maybe we look at perhaps the contract structures themselves and the length of contracts, the update into '27 we got earlier this year was healthy and great.

And curious if you're seeing contract structures extend out as we're seeing with some of these other rack scale input and what that looks like in terms of securitizing supply with you being the supplier over a multiyear period, particularly as you're investing on an accelerated cadence into CapEx?

Yes. That's a good question. Thank you very much for the question. Yes, if we look at contracts, it works a bit different here. I think it's it's all over these hyperscalers and data center and networking customers, it's about very tight relations. We have very, very tight relations. That basically means we have a lot of alignment on road maps or future. How do you think about, let's say, multilayers or you think about 0 stop, which is basically making sure there is no antenna function in these boards, you can imagine that everything becomes more and more complex. So you get a lot of antenna functionality in that thing which you don't want. So 0 sub is a new thing there.

We spoke already about the empower the power and the signal is separated, there's a lot of, let's say, material science in our boards, which makes sure that signal integrity becomes at the highest part. I think that's the key thing for these customers. you need to be the technology leader. You cannot be a follower here. And then the other thing is, of course, you need to have the capacity and the flexibility. And that's what we provide, let's say, being in China, being in China Posninoucase, Malaysia and being in the U.S. and hopefully soon in Europe.

So that's basically where we are, and that's basically tightened that relation with the customers. The other side is, let's say, the suppliers, they are the same thing. We have strategic alliances with all the critical components. And yes, of course, we have contracts in place. But if you have to rely on that contract, you're just too late. It's always a matter of, let's say, relation and making sure you're very relevant for that supplier, you're very relevant to your customers. So that will be my answer here.

By the way, just to add to Edwin's answer. So -- and also coming back to part of the question. So to clarify, within data center and networking, we don't have just an anchor customer. I think there was a reference to an anchor customer specific to a facility being Penang earlier in the conversation. But we have about [ 10 ] very major customers within that segment. Only 1 is a 10% enter right now, but we're playing with [ 10 ] substantial names. .

Okay. That's great. That was actually going to be a follow-up, particularly Daniel because of your CapEx commentary, I think last quarter, you -- as you mentioned, we're pointing to $250 million at the midpoint. And quarter, it sounds like $310 million, and you're still talking about FY '27 going up. So you're talking about an incremental [indiscernible] relative to at least what we signaled last quarter. if you can point to any sort of puts and takes on the pace at which you might recognize these ramps. I don't know if you're ready to make those types of disclosures. I understand if you're not. And if you're not the question on A&D you're pointing ammunition in the space, similar sort of question on contract structure, are these procurement-based contracts whereby margins are fixed? Or are these fixed firm price, whereby there's potential of margin accretion and I'll stop there.

I guess I'll first address your capital expenditures. So I'm not going to go beyond what I just said about this year, as you mentioned, so our capital expenditures from this year is going up from -- yes, centered on $250 million to now centered on $310 million. So the range is from $300 million to $320 million. And so that's accelerated a little bit of what we had previously talked about over the next 2 years, and that's to continue to stay at pace with the demand that we are experiencing from our customers in the data center area. So I'll maybe pass it over you to answer the other question. Sorry, do you want to repeat that second 1 a comment earlier.

And as far as -- you're talking diminution in space, and it sounds like Edwin you're saying munitions might be the upside more near term space for a longer build upside.

Yes, absolutely. By the way, we see strong demand in general, in our Aerospace and Defense business. And for the obvious reasons, of course. But on the munitions side, yes, if you read the newspapers, the there is the supply becomes more and more important. And we see that. We are long lead time items. So basically the primes are already coming to us, let's say, with respect to what can you do additionally on the munition side. So -- and that's -- for us, it's more of the same. We already do that. So that's a very, very good thing. So yes, that's the answer.

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Edwin Roks for any closing remarks. [indiscernible]

Yes. Thank you, Sheri. Now I'd like to close by summarizing 3 key items. First, we are experiencing a high healthy growth. We delivered strong sales growth in Q1 of 30% year-on-year, resulting in an all-time high for quarterly revenue, driven by increases in our data center networking, medical, industrial and instrumentation and aerospace and defense end markets. Secondly, our adjusted EBITDA for the first quarter of 15.7% as reflected strong operating performance, leading to another all-time high record and quarterly non-GAAP EPS results of $0.75 per diluted share.

And third, we continue to generate solid cash flows from operation, which enables us to invest in our projected continued growth while maintaining a healthy net leverage ratio of about 1. In closing, I would like to thank all the employees of TTM, our customers, our suppliers and our shareholders for your continued support. Thank you very much, and goodbye.

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

Good day, and welcome to the TTM Technologies Q4 2025 Earnings Conference Call. [Operator Instructions] 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.

Greetings, everyone. Welcome, and thank you for joining us today. I'm Sean Hannan, Vice President of Investor Relations for TTM. With me on the call are Edwin Roks, our President and Chief Executive Officer; and Dan Boehle, our Executive Vice President and Chief Financial Officer. Before we get started, I'd like to remind everybody that today's 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 one 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. 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 reconciliations between GAAP and non-GAAP measures included in your 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 our call. Here is Edwin.

Thank you, Sean. Good afternoon, everyone, and thank you for joining us for our fourth quarter and fiscal 2025 conference call. At TTM Technologies, we are focused on designing and manufacturing complex products and solutions in 2 strategic directions.

The first is advanced interconnect, which includes highly complex printed circuit boards, substrates and advanced packaging. The second strategic direction builds on our advanced interconnect technology to design and manufacture sophisticated modules, subsystems and systems. Examples of this include our in-house developed RF modules, thermal and power management systems, edge and AI processing products as well as complex subsystems and fully integrated mission systems.

We believe the future of electronics lies in speed to market, high reliability and efficient technology integration. The markets in which we do business continue to demand highly complex technology solutions in an increasingly complex size and footprint. Our strategy is to stay at the cutting edge of advanced interconnect technologies through innovation and continue to move up the value chain into complex modules and subsystems that combine sensors, actuators, RF and photonics.

We engage early with our customers to ensure alignment on product development, which helps optimize their sourcing of leading technologies and streamlines their supply chain. From a demand standpoint, we expect healthy tailwinds due to our participation in 2 key megatrends currently driving economic growth, artificial intelligence and defense. As stated previously, approximately 80% of our net sales are related to these 2 megatrends. Our ability to seize these organic growth opportunities requires our continued focus on technological innovation as well as expanding our capacity across our strategic footprint.

We are further investing capital and resources to take full advantage of these opportunities today and in the future through our global footprint, which offers our customers manufacturing options across 24 sites located in China, Malaysia, Canada and the United States. We stand well positioned to support this growth across our end markets and are on track towards our ambition to grow revenues 15% to 20% per year for the next 3 years and to double our earnings from '25 to '27, which were goals previously shared on January 13.

In our Commercial segment, we are highly focused on supporting the demand wave of artificial intelligence in the data center computing and networking end markets. In our aerospace and defense end market, we continue to excel with our leading position in advanced interconnect products as we work to expand our product offerings in integrated other products, including modules, subsystems and into mission systems. We are also focused on technological opportunities arising through increased use of automation and AI applications in our medical, industrial and instrumentation end markets, while we remain strategically positioned in high-value automotive solutions.

I'll now begin with an overview of our business highlights from the quarter, then we'll follow with a summary of our Q4 and fiscal 2025 financial performance and our Q1 and fiscal 2026 sales guidance. We will then open the call for your questions. We delivered an excellent fourth quarter of 2025, and I would like to thank our employees for delivering these results. We achieved sales of $774.3 million, above the high end of our guided range and non-GAAP EPS of $0.70 per diluted share met the high end of our guided range.

Sales grew 19% year-on-year, reflecting continued demand strength in our data center computing and networking end markets, driven by the requirements of generative AI, while our medical, industrial and instrumentation and aerospace and defense end markets also experienced solid to strong growth. The company's adjusted EBITDA margin was 16.3% in the fourth quarter of 2025, a strong result compared with 14.7% in the prior year, reflecting continued improvements in execution.

Non-GAAP EPS of $0.70 per diluted share was an all-time quarterly record high for TTM. And cash flow from operations were $63 million or 8.1% of sales, which brings fiscal 2025 cash flow from operations to $292 million or 10% of sales. The aerospace and defense end market represented 41% of fourth quarter 2025 sales. Sales in the aerospace and defense market grew 5% year-on-year for the fourth quarter and 13% year-on-year for the full year of 2025. The sales growth in the defense market as a result of positive tailwinds in defense budgets, our strong strategic program alignment and the key bookings for ongoing programs.

During the fourth quarter of 2025, we saw significant A&D bookings related to the APS-153 airborne surveillance radar, LTAMDS air defense radar, MRAM, air dominance missile and Javelin anti-armor missile system. In addition, we continue to see an increase in bookings for restricted programs. A&D book-to-bill was 1.46 for the quarter and 1.04 for the full year of 2025, which increased program backlog to $1.6 billion compared to $1.56 billion a year ago.

We expect sales in Q1 2026 from this end market to represent 42% of our total sales. Sales in the data center computing end market represented 20% of fourth quarter 2025 sales. This end market experienced 57% year-on-year growth in the fourth quarter and 36% year-on-year growth in the full year of 2025, which reflects continued demand strength from our data center customers, building products for AI applications.

The networking end market represented 8% of fourth quarter 2025 sales. Year-on-year growth was 23% for the fourth quarter and 43% for the full year of 2025 as this market continues to become more correlated with the AI-related demand for more complex switching technology. Due to the AI-related correlation between data center computing and networking end markets, we will begin reporting them as a single combined end market in 2026. And consequently, we will be reporting on four end markets going forward.

For the fourth quarter of 2025, the combined sales for data center and networking would have represented 36% of total sales, and we expect the first quarter of 2026 to represent 37% of total sales. The medical, industrial and instrumentation end market represented 14% of fourth quarter 2025 sales. This end market saw a year-on-year growth of 28% during the fourth quarter and 22% for the full year of 2025 as medical and industrial areas saw increased demand for AI-enabled robotics and more complex sensing applications and the instrumentation area saw increased demand for automated testing equipment and AI applications.

For the first quarter of 2026, we expect the medical, industrial and instrumentation end market to represent 14% of total sales. Automotive sales represented 9% for the fourth quarter 2025 sales. We will be increasingly selective in this market to focus on higher value-add products that carry margin profile consistent with our financial growth. We expect the automotive end market to represent about 8% of total sales in the first quarter of 2026. The overall book-to-bill ratio was 1.35 for the fourth quarter of 2025 with the Commercial reporting segment at 1.28, the A&D reporting segment at 1.46 and the RF&S reporting segment at 0.94.

At the end of 2025, the 90-day backlog, which is subject to cancellations, was $654.9 million compared to $502.1 million at the end of last year.

Now Dan Boehle will summarize our financial performance for the fourth quarter and full year. Dan?

Thanks, Edwin, and good afternoon, everyone. I will review our financial results for the fourth quarter and full year 2025 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 fourth quarter, net sales were $774.3 million compared to $651 million in the fourth quarter of 2024. The 19% year-over-year increase was due to continued strong growth in our data center computing, networking, medical, industrial and instrumentation and aerospace and defense end markets, partially offset by a decline in our automotive end market.

For the full year, net sales were $2.9 billion compared to $2.4 billion in 2024. The 19% increase for fiscal 2025 was driven by the same end market dynamics that drove growth in Q4. GAAP operating income for the fourth quarter of 2025 was $80.7 million compared to GAAP operating income for the fourth quarter of 2024 of $9 million, inclusive of a $32.6 million goodwill impairment charge related to the RF&S Components segment.

For the full year of 2025, GAAP operating income was $264.7 million compared to $116 million in 2024, inclusive of the $32.6 million goodwill impairment charge related to RF&S Components segment. On a GAAP basis, net income for the fourth quarter of 2025 was $50.7 million or $0.48 per diluted share. This compares to GAAP net income for the fourth quarter of 2024 of $5.2 million or $0.05 per diluted share, inclusive of a $32.6 million goodwill impairment charge related to the RF&S Components segment.

For the full year of 2025, net income was $177.4 million or $1.68 per diluted share. This compares to $56.3 million or $0.54 per diluted share in 2024, inclusive of the $32.6 million goodwill impairment charge related to the RF&S Components segment. 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 compensation, gains on the sale of property, unrealized gains or losses on foreign exchange and other unusual or unfrequent items.

We present non-GAAP financial information to enable investors to see the company through the eyes of management and to facilitate comparisons with expectations and prior periods. Gross margin in the fourth quarter of 2025 was 21.7% and compares to 20.5% in the fourth quarter of 2024. For the full year of 2025, gross margin was 21.3% and compares to 20.4% in 2024. The year-on-year improvement in both periods was due primarily to higher sales volume and favorable product mix, particularly in the data center computing, networking and aerospace and defense end markets as well as improved operational execution.

Selling and marketing expense was $19.8 million in the fourth quarter or 2.6% of net sales versus $18.9 million or 2.9% of net sales a year ago. For the full year of 2025, selling and marketing expense was $80.8 million or 2.8% of net sales compared to $76.2 million or 3.1% of net sales in 2024. Fourth quarter general and administrative expenses was $43.1 million or 5.6% of net sales compared to $40.9 million or 6.3% of net sales in the same quarter a year ago.

For the full year of 2025, general and administrative expense was $168.3 million or 5.8% of net sales compared to $156.6 million or 6.4% of net sales in 2024. Our operating margin in the fourth quarter of 2025 was 12.7%, a 260 basis points improvement from 10.1% in the same quarter last year. For the full year of 2025, operating margin was 11.7% as compared to 9.6% in 2024. The increase in both periods was due to the improvement in gross margin as well as continued spending discipline in selling, general and administrative expenses.

Interest expense was $11.8 million in the fourth quarter of 2025 compared to $10.7 million in the same quarter last year. For the full year of 2025, interest expense was $43.2 million compared to $45.5 million in 2024. Interest income was $2.8 million in the fourth quarter of 2025 compared to $2.1 million in the same quarter last year. For the full year of 2025, interest income was $10.4 million compared to $10.9 million in 2024. Other nonoperating income and expenses in the fourth quarter of 2025 totaled a net expense of $3 million as compared to net income of $1.4 million in the same quarter last year.

For the full year of 2025, other nonoperating income and expenses totaled a net expense of $4.8 million compared to net income of $3.5 million in 2024. Our effective tax rate was 13.2% in the fourth quarter of 2025, resulting in a tax expense of $11.4 million. This compares to an effective tax rate of 12.2% or a tax expense of $7.2 million in the same quarter last year.

For the full year of 2025, the effective tax rate was 14.5%, resulting in tax expense of $43.9 million compared to an effective tax rate of 12.4% and tax expense of $25.2 million in 2024. Full quarter 2025 net income was $74.8 million or $0.70 per diluted share. This compares to fourth quarter 2024 net income of $51.4 million or $0.49 per diluted share.

For the full year of 2025, net income was $259 million or $2.46 per diluted share compared to $177.5 million or $1.70 per diluted share in 2024. Adjusted EBITDA for the fourth quarter of 2025 was $126.2 million or 16.3% of net sales compared to fourth quarter 2024 adjusted EBITDA of $95.7 million or 14.7% of net sales. For the full year of 2025, adjusted EBITDA was $456.3 million or 15.7% of net sales compared to $351.5 million or 14.4% of net sales in 2024.

I will now turn to our guidance for the first quarter of 2026. We project net sales for the first quarter of 2026 to be in the range of $770 million to $810 million and non-GAAP earnings to be in the range of $0.64 to $0.70 per diluted share. As a reminder, we expect first quarter profitability to be typically impacted by increased operating costs, particularly labor costs resulting from the Chinese New Year holiday. In addition, we expect our full year 2026 total net sales to increase in the range of 15% to 20% over 2025 total net sales. The first quarter 2026 EPS forecast is based on a diluted share count of approximately 106.7 million shares, which includes the dilutive effect of outstanding stock options and other stock awards. We expect SG&A expense to be about 8.5% of net sales in the first quarter and R&D expenditures to be about 1% of net sales. We expect interest expense of approximately $10.6 million, interest income of approximately $2.2 million and other nonoperating expense of approximately $2.7 million.

We estimate our effective tax rate to be between 12% and 17%. Further, we expect to record depreciation of approximately $29.8 million, amortization of intangibles of approximately $9.2 million, stock-based compensation expense of approximately $11.5 million and noncash interest expense of approximately $0.5 million. And finally, I'd like to announce that we will be participating in the Citi Industrial Tech and Mobility Conference in Miami, Florida on February 19 and the J.P. Morgan Global Leveraged Finance Conference in Miami, Florida on March 3. That concludes our prepared remarks. Now I'll turn it over for questions.

And our first question will come from the line of Jim Ricchiuti with Needham & Co.

Congrats on the quarter. First question is regarding capacity. And I wonder if you could talk about where you stand with respect to adding additional data center capacity in China as needed? And second question is just where you stand with Syracuse in terms of the ramp of the new capacity there? And then I have a follow-up question on margins.

Thank you very much, Jim. To answer your first question, we're making very good progress, both in China and the U.S. on expanding our capacity. And remember that we guided, let's say, our growth 15% to 20% over the coming 3 years. That capacity will do the job, let's say. It's -- and we have even more capacity to do even more depending on the demand, of course. But so capacity is not the issue. Also, the supply chain is not the issue. The equipment is not the issue. So we're well on track.

We were there, let's say, last week in China. Things are going very, very, very smooth. To answer your second question on Syracuse, same thing. Same thing. We have our lead customers there. The building is up, as you know. The equipment is in. We are basically doing the tile and snow. And as we said 3 months ago, we are exactly on track for the second half of this year, we will see first revenues coming from Syracuse Diamond, which is a really, really nice milestone.

The question just -- a final question for me is just on gross margins, the improvement you saw. You highlighted that it was volume-driven and mix. I wonder if you could also give us a sense of what the headwind was from Penang -- and was it more mix related or volume related in terms of A&D and data center?

Jim, this is Dan. I'll take that one. So Q4, first to address your Penang question, Q4 at the gross profit level still had a headwind of about $180 million, and we had guided $160 million, so a little bit worse than expected there in Q4. But still, as you noted, improved gross margins. So that gross margin improvement was primarily mix in data center and networking as well as we did have improved margins in A&D, those 2 in that order. So you're right on with that. But about 180 basis points on Penang that will improve throughout this year. And as we guided before, it will be about half of that by the end of the year.

And maybe, Jim, some additional color on Penang. We basically doubled the revenues versus last quarter. So that's going in the right direction. Also, if I look at the yield numbers, and again, we look at these yield numbers every week on the lead vehicles, we see that it's going in the right direction. I will be there, let's say, in 1 week from now. It is going really, really smooth in Penang. So I really hope we do better, let's say, than the 160 basis points that cut it in half for the end of the year, what we said before. We're making good progress. So I really hope to do a lot better.

And that will come from the line of Will Stein with Truist Securities.

Congratulations on the strong results and outlook. Edwin, a moment ago, you referred to capacity in the United States. I suspect you're talking about Eau Claire. Could you give us any update as to what the plans are to equip that facility and when we might see any revenue from it? Any longer-term plans you can tell us about Eau Claire?

Yes, absolutely, Bill. Pleasure to do that. First of all, I was referring to China and to the existing facilities in the U.S. But I'm happy to talk about Eau Claire. Eau Claire is an amazing site. It's the largest site, if I exclude some of the in-house activities of some of our customers. But if I look at the bigger scheme, it's the largest PCB site in the U.S. It's 750,000 square feet, and it's based on 3 different modules. I was there 2 weeks ago, and it is really, really big, well maintained. The previous owner, TDK, did a really good job. It's well maintained. So what we are going to do in the coming 18 months and 2 years, let's say, we're going to tool up that facility.

We are discussing right now, and this is a work in progress right now with our lead customers, both on the commercial side and the defense side. So that's still a mix. They need the capacity. So I think we are in a good position there. But again, this is going hand in hand. The thing is the facility is there. It will take us, let's say, 18 to 24 months to get first revenues, but it's going really, really smooth. And by the way, Eau Claire is not built in the capacity plans we described.

Okay. So it sounds like that's 18 to 24 months out.

Yes, Eau Claire will be on top of.

Got it. Maybe one other. The very large book-to-bill you had this quarter, it's clearly, there's a lot in defense, but even in the commercial part of the business, it was strong. And yet you also disclosed the 90-day book-to-bill. So it sounds like this is not so much sort of rush orders for the next quarter, but it's providing you greater visibility. Any color on the orders by end market? Or sort of what's -- is that -- I guess I'm trying to ask whether that's driven by just trying to lock in capacity or if it's a matter of providing a commitment to TTM so that you can then commit to add capacity?

Yes. Yes, happy to do that. So if you look at our visibility, that didn't change, let's say, for the business, the ongoing business on the commercial side, mostly data centers and networking. That's still about 6 to 9 months. Yes, that's our outlook which is a normal number. Over time, we will get, let's say, on some more strategic elements of these same customers, we get some more visibility, yes. But on the running business, it is about 6 to 9 months, and that was the case, and that's still the case.

On the defense side, it's, of course, a different story. There, the backlog we have, the $1.6 billion is a big number. The pipeline is even bigger. And as you know, this is going over multiple years. So in generally, let's say, 2 years or even 2.5 years, that's where we use this $1.6 billion for. So it's still in that same order in this case.

And that will come from the line of Ruben Roy with Stifel.

This is [ Shahid Shah ] on for Ruben. Congrats on the quarter. I guess I want to ask about the CapEx and how fungible that is relative to aerospace and defense and data center and how you're thinking about that growth relative to the sort of updated long-term '27 targets you provided earlier?

Yes. So we had also given some guidance before that for the data center and compute capacity that we're putting on in China, that will be an additional incremental capital expenditure of about $200 million to $300 million over the next 2 to 3 years. So that's above the 4% to 5% normal capital expenditures that we have. So frankly, going in from this year to next year, we'll probably see about almost the same level of CapEx. We'll disclose in our 10-K, the expected CapEx for 2026, which is in the range of $240 million to $260 million, and then that will grow into the following year as well.

Okay. And in terms of the doubling in earnings, are you thinking of that really organically or inorganically? Like how are you thinking about M&A in this scenario?

Yes, Ruben, happy to answer that question. This is all organic growth. There's so much demand, and we are investing in our capacity. So based on that, let's say, and based on, let's say, the traction we make on yield and all the other operational elements, we think we can double the earnings in 2 years.

And one moment for our next question and that will come from the line of Mike Crawford with B. Riley Securities.

Just digging in deeper into the additional data center capacity you're putting in place in China. I believe the most advanced printed circuit boards you're making now are in Dongguan with maybe 87 layers, asymmetric designs. And is that -- are those processes being ported to these other facilities in China as well? And how long does that take?

Yes. Mike, that's a good question. Indeed, everything, let's say, beyond the 60 layers, yes. So we hear numbers. We hear different numbers. The 78, not the 87. The 78 layers is one of the boards we are working on, and that's going very smooth. But I can tell you that the numbers go up. If we speak with -- and of course, we speak with our customers on a daily basis, the demand is high, but the number of layers is going up. There are numbers, let's say, beyond the 100 layers already, which are required. Of course, these systems become more and more and more compact that requires more layers and more complexity. So -- and we are well positioned. We are happy to see that because we are well positioned to do these multiple layers.

And Mike, I'll just add that you mentioned the sites. So Dongguan and Guangzhou, those 2 sites, both are where we do the artificial intelligence boards now. And the capital expenditures that we are doing out there are additional equipment and facilitization and optimization of those lines in those same factories. So it's not new factories. And so to your question, it will very easily and efficiently be able to get that new capacity up and running.

Okay. And then a follow-up is regarding space. So historically, I think defense has been maybe 90% of your aerospace and defense business with maybe 5% space. But now there's talks of putting as many as a million data center satellites in low earth orbit. And so I would imagine those might have different properties required to the printed circuit boards going into such equipment. And is that something that you're working on now? Or is that another future opportunity?

Both, Mike. It is something we're working on right now. We have the technologies, but it is also -- space is absolutely one of our strategic directions and requiring more PCBs, but not only PCBs, also integrated modules, radiation heart and so on and so forth. So that's absolutely on our radar and absolutely in our strategic plan.

And we do have a follow-up question, and that will come from the line of Will Stein with Truist Securities.

Follow-up is a cost question on copper. Copper has traditionally been a significant expense for TTM. I think the price has been quite volatile and rising. I believe you hedge it, but can you just sensitize us what should we expect the impact of volatile copper prices to be on the P&L over the next few quarters?

Sure. Thanks for your question, Will. We don't expect any significant impacts from it. Generally, we build the volatility into our pricing, right? So if we see it going up, we're going to add that into our pricing. We're able to pass that through to our customers. So we're quickly able to update our pricing models, right? And then to your point, we do hedge it, so that offsets and mitigates some of the risk as well. But most of -- the biggest mitigation is that we're able to price it in.

I'm showing no further questions in the queue at this time. I would now like to turn the call over to management for any closing remarks.

Okay. Thank you, Sherry. So I'd like to close by summarizing 3 items. First of all, we are growing. We delivered strong sales growth in Q4 of 90% year-on-year, driven by increases in our data center computing, networking, medical, industrial and instrumentation and aerospace and defense markets. Second, our adjusted EBITDA for the first -- for the fourth quarter of 16.3% reflected strong operating performance, leading to an all-time high record quarterly non-GAAP EPS of $0.70 per diluted share.

And third, we continue to generate solid cash flow from operations, which enables us to invest in our projected continued growth. In closing, I would like to thank all employees of TTM, our customers, our suppliers and our shareholders for their continued support. So thank you very much, and goodbye.

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

Good afternoon. Thank you for standing by. Welcome to the TTM Technologies, Inc. Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, October 29, 2025.

Dan Boehle, TTM's Chief Financial Officer, will now review TTM's disclosure statement.

Before we get started, I'd like to remind everyone that today's 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 one 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.

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 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 our call.

I will now hand the call over to Edwin Roks, our new President and Chief Executive Officer. Edwin, welcome to the TTM team and to your first quarterly conference call with us. Please go ahead.

Thank you, Dan, for welcoming me. Good afternoon, everyone, and thank you for joining us for our third quarter 2025 conference call. I want to thank Tom Edman for his leadership of the company for more than a decade, and I look forward to engaging with our shareholders in the future.

Before we review results, I want to reaffirm our strategic foundation. At TTM Technologies, we believe the future of electronics lies in speed, reliability and integration. With over 17,000 employees across 22 factories, we already deliver millions of printed circuit boards every year. But our road map goes further.

We continue to move up the value chain into highly complex modules and subsystems that combine sensors, actuators, RF and photonics for markets where reliability and performance matter most, aerospace, defense, data centers, telecom, instrumentation and medical systems.

From AI-driven PCB design to mission-critical subsystems, TTM's mission is in our name, time to market, delivering complex, high-performance solution at global scales.

I know you want to hear whether I make any strategic changes. And all I will say about that now is that we're currently in the middle of our disciplined annual strategic review and will go before the Board for approval next month. This plan will guide our future conversations. But as you'll hear throughout the comments today, TTM is performing well and is aligned perfectly with key growth industries. So I'm happy to be here and excited about the opportunities for continued growth and excellence ahead.

I'll now begin with a review of our business highlights from the quarter and a discussion of our third quarter results, followed by an update of our current geopolitical environment and an update of our planned expansions. Then we'll follow with an overview of our Q3 2025 financial performance and our Q4 guidance. We will then open the call to your questions.

We delivered an excellent third quarter of 2025, and I would like to thank our employees for their part in delivering these results. For the fourth quarter in a row, TTM achieved sales and non-GAAP EPS above the high end of the guided range. Sales grew 22% year-on-year, reflecting continued demand strength in our data center computing and networking end markets, driven by the requirements of generative AI.

Our medical, industrial, instrumentation and aerospace and defense end markets also experienced double-digit year-on-year sales growth. As you know, the company reports sales in 5 strategic end markets. Aerospace and defense is a focused end market, which we deliver a mix of approximately 50-50 between PCBs and integrated electronics products.

Sales in our aerospace and defense markets were better than expected this quarter at 45% of total sales, resulting from a pull forward of sales that were originally expected in the fourth quarter. Demand in this end market continues to be strong and book-to-bill increased to very close to 1 for the third quarter, keeping program backlog steady at approximately $1.46 billion.

Three of the remaining 4 end markets, data center computing, networking; and medical, industrial and instrumentation; are experiencing sales growth directly or indirectly related to the growing requirements of AI. Nearly all of data center computing and networking and approximately 25% of medical, industrial and instrumentation.

In total, approximately 80% of our total sales in the quarter related to 2 very strong industries, aerospace and defense and AI. We are well positioned in both areas and offer highly innovative technologically advanced products to meet our customers' needs. We are focused on working diligently with our customers and suppliers to support the continued growth demand in each.

The company's adjusted EBITDA margin was 16.1%, which is comparable to 16.3% in the same quarter a year ago, reflecting continued solid execution. Non-GAAP EPS of $0.67 reflect a solid consecutive quarterly record for TTM. And cash flows from operations were $141.8 million or 18.8% of sales, which brings the year-to-date cash flow from operation to $229 million or 10.7% of sales.

To reiterate comments made over the past 2 quarters regarding the potential impact of tariffs, with our diversified supplier base and global manufacturing footprint, we do not expect a significant short-term impact of tariffs, whether through direct impact to sales or direct impact to materials and equipment purchases. And while it's possible that there could be an indirect impact such as overall end market demand weakness and economic slowdown, we have not seen that impacting our key end markets, as I mentioned.

In Penang, we continue to make progress with our customer qualifications and training the local workforce. Third quarter sales matched the second quarter at $5 million, and we expect to see growth in the fourth quarter. We are focused on improving and sustaining yields to support our customers' production cycles, and it remains one of our top priorities.

Customer interest in our Penang facility remains strong, and our confidence in our growth in Malaysian production is evident in our long-term plans for a second production facility announced last quarter. We will align the timing of construction of our planned second facility with the longer-term customer demand. And as of now, we have not broken ground.

Progress on our Ultra-HDI PCB manufacturing facility in Syracuse, New York continues as planned. Equipment is arriving, and we are beginning to install and test equipment setups. As a reminder, we expect volume production to start in the second half of 2026.

The aerospace end market represented 45% of third quarter 2025 sales compared to 45% in the second quarter and 45% in the third quarter of 2024. Sales in this market grew 20% year-on-year to a record high and were significantly better than expected, partially due to timing of sales that were originally planned in the fourth quarter.

The solid demand in the defense market is a result of positive tailwinds in defense budgets, our strong strategic program alignment and key bookings for ongoing programs. We maintain a solid A&D program backlog of about $1.46 billion at the end of the quarter compared to $1.49 billion a year ago.

Bookings in the aerospace and defense market ship over a longer period of time than our commercial markets and provide good visibility into future sales growth. During the quarter, we saw significant bookings related to the AMRAAM missile program, the passive detection and reporting system for the U.S. Army and the APS-153 radar system for the MH-60R helicopter. We expect sales in Q4 from this end market to represent 42% of our total sales.

Sales in data center computing end markets represented 23% of third quarter 2025 sales compared to 21% in the second quarter and 20% of third quarter 2024 sales. This end market saw 44% year-on-year growth, which was better than expected and a record high due to continued demand strength from our data center customers, building products for GenAI applications. We expect this growth rate to continue, increasing this end market to 28% of the fourth quarter sales.

The medical, industrial and instrumentation end market represented 14% of third quarter 2025 sales compared to 15% in the second quarter and 14% in third quarter of 2024. This end market saw year-on-year growth of 22% during the third quarter of 2025 as the medical and industrial segment saw increased demand for robotics and in the Instrumentation segment saw increased demand for automated test equipment and GenAI applications.

For the fourth quarter, we expect the medical industrial instrumentation end market to represent 14% of total sales. Automotive sales represented 11% of third quarter 2025 sales compared to 11% in the second quarter and 14% in the third quarter of 2024. The year-over-year decline for automotive was primarily due to continued inventory adjustments and soft demand at several customers. We expect the automotive end market to represent about 9% of total sales in the fourth quarter.

Networking represented 7% of third quarter 2025 sales compared to 8% in the second quarter and 7% of third quarter 2024 sales. Year-on-year growth was 35% as this market continues to show strong growth driven by AI-related demand and new products. In Q4, we expect this market to represent 7% of total sales.

At the end of Q3, our 90-day backlog, which is subject to cancellations was $610.4 million compared to $534.5 million in the third quarter of last year. As I mentioned earlier, our aerospace and defense program backlog was $1.46 billion at the end of Q3 this year compared to $1.49 billion at the end of third quarter 2024. Our overall book-to-bill ratio was 1.15 for the third quarter of 2025 with the Commercial segment at 1.29, the A&D segment at 0.99 and the RF&S segment at 0.95.

Now Dan will review our financial performance for the third quarter. Dan?

Thanks, Edwin, and good afternoon, everyone. Highlights of our third quarter financial results were included in the press release distributed today that are summarized on Slide 7 of the earnings presentation posted on our website.

For the third quarter, net sales were $752.7 million compared to $616.5 million in the third quarter of 2024. The 22% year-over-year increase was due to growth in our aerospace and defense, data center computing, networking; and medical, industrial and instrumentation; end markets, partially offset by a slight decline in our automotive end market.

On a GAAP basis, gross margin for the third quarter of 2025 was 20.8% compared to GAAP gross margin for the third quarter of 2024 of 21.1%. On a GAAP basis, operating income for the third quarter of 2025 was $71.9 million or 9.6% compared to GAAP operating income for the third quarter of 2024 of $51 million or 8.3%.

On a GAAP basis, net income in the third quarter of 2025 was $53.1 million or $0.50 per diluted share. This compares to GAAP net income for the third quarter of 2024 of $14.3 million or $0.14 per diluted share.

In the third quarter of 2025, the Aerospace and Defense segment recorded $336.8 million in net sales and $52.9 million in segment operating income compared to $279.5 million in net sales and $40.3 million in segment operating income in the year ago quarter.

In the third quarter of 2025, the Commercial segment recorded $408.9 million in net sales and $60 million in segment operating income compared to $329.4 million in net sales and $51.1 million in segment operating income in the year ago quarter.

In the third quarter of 2025, the RF and Specialty Components segment recorded $10.4 million in net sales and $3.1 million in segment operating income compared to $9.8 million in net sales and $2.4 million in segment operating income in the year ago quarter.

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 expenses items such as amortization of intangibles, impairment of goodwill, stock 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 expectations and prior periods.

Gross margin in the third quarter was 21.5% compared to 22% in the third quarter of 2024. The year-over-year decrease was primarily due to ramp-up costs in connection with our fabrication plant in Penang, Malaysia. Selling and marketing expense was $20.5 million in the third quarter or 2.7% of net sales versus $18.9 million or 3.1% of net sales a year ago.

Third quarter general and administrative expense was $42.1 million or 5.6% of net sales compared to $36.4 million or 5.9% of net sales in the same quarter a year ago. The dollar increase was primarily driven by an increase in the incentive compensation accrual and outside services.

In the third quarter of 2025, research and development was $6.9 million or 0.9% of net sales compared to $7.7 million or 1.3% of net sales in the same quarter last year. Interest expense was $9.9 million in the third quarter of 2025 compared to $11.3 million in the same quarter last year. During the third quarter of 2025, there was $1.8 million of realized foreign exchange loss below the operating income line compared to $1.6 million of realized foreign exchange loss in the third quarter of 2024.

Interest and other income totaled $2.5 million in the third quarter of 2025. This compares to interest and other income totaling $3.6 million in the same quarter of last year. Our effective tax rate was 15% in the third quarter, resulting in tax expense of $12.5 million. This compares to a rate of 10.6% or a tax expense of $6.7 million in the same quarter of last year.

Third quarter 2025 net income was $71 million or $0.67 per diluted share. This compares to third quarter 2024 net income of $56.8 million or $0.55 per diluted share. Adjusted EBITDA for the third quarter of 2025 was $120.9 million or 16.1% of net sales compared with third quarter 2024 adjusted EBITDA of $100.6 million or 16.3% of net sales.

Depreciation for the quarter was $27.6 million. Net capital spending for the quarter was $99.2 million. Cash flow from operations in the third quarter of 2025 was $141.8 million or 18.8% of net sales. Cash and cash equivalents at the end of the third quarter of 2025 totaled $491.1 million, and our net debt divided by last 12 months EBITDA was 1.0.

Now I will turn to our guidance for the fourth quarter of 2025. We project net sales for the fourth quarter of 2025 to be in the range of $730 million to $770 million and non-GAAP earnings to be in the range of $0.64 to $0.70 per diluted share, which is inclusive of operating costs associated with starting up our Penang facility.

The EPS forecast is based on a diluted share count of approximately 106 million shares, which includes the dilutive effect of outstanding stock options and other stock awards. We expect SG&A expense to be about 8.9% of net sales in the fourth quarter and R&D to be about 1% of net sales. We expect interest expense of approximately $10.2 million and interest income of approximately $2.7 million. We estimate our effective tax rate will be between 11% and 15%.

Further, we expect to record depreciation of approximately $28.1 million, amortization of intangibles of approximately $9.2 million, stock-based compensation expense of approximately $12.3 million and noncash interest expense of approximately $0.5 million.

And finally, I'd like to announce that we will be participating in the Stifel Midwest One-on-One Conference in Chicago, Illinois on November 6, the Bank of America Leveraged Finance Conference in Boca Raton, Florida on December 2, the UBS Global Industrials and Transportation Conference in Palm Beach, Florida on December 3; and the UBS Technology Conference in Scottsdale, Arizona on December 4.

That concludes our prepared remarks. Now I'd like to turn it over for questions. Sherry?

[Operator Instructions] And our first question will come from the line of Jim Ricchiuti with Needham & Co.

First off, Edwin, welcome. Best of luck to you. I wanted to start off just on the data center market. Can you talk about; 2 questions. One, how far out does your visibility extend into this market? And the follow-up really deals with the -- whether you have been able to bring on additional capacity to be able to satisfy the demand from your customers from your 2 main facilities in China?

Yes. Jim, first of all, thank you for your question, and thank you for your nice comments here, and good to meet you again. Yes, the visibility is pretty okay. I would say our visibility is between 6 to 9 months. And again, we are already dealing with the top players there. So it's going relatively smooth. And if I look at capacity, Jim, I think when we are in the middle of, let's say, of our strategic planning, we are sort of, let's say, over the coming years, we're good regarding capacity, both in North America and Asia Pacific; well balanced, by the way, between these 2 continents. So that's -- yes, that's what I want to mention here.

And Penang, can you update us, maybe, Dan, you could take this one, just the margin headwind that you experienced in Penang and how you think about that in Q4 going forward?

Yes. So happy to update you about Penang. First of all, Penang remains a key part of our China Plus One strategy. And we're making very good progress there, I would say. Like Tom mentioned in the last quarter, we are very much focused now on yield before we start ramping up. We want to ramp steadily with our customers. So the good news, Jim, is that we have 5 customers lined up, and we are basically qualifying these customers before the end of the year, and that's still progressing very well.

The training aspect is key. We're working a lot with local staff now. The training aspect is key. That we are still planning also for that second facility in Penang. So I will say I'm pleased with the progress over the last quarter. I know we were a bit optimistic in the past, but I think we should be okay going forward.

And Jim, I'll jump in and address your question with regards to the headwind on the profit. In Q3, it was about 195 basis points to the bottom line, which is an improvement from Q2, which was about 210 basis points. And then in Q4, we're forecasting with increased revenue about 160 basis points impact to the bottom line, which is comparable to Q4 of last year, actually, when you look at it year-over-year.

One moment for our next question. And that will come from the line of Mike Crawford with B. Riley Securities.

Just more broadly, could you help characterize your PCB manufacturing capacity share globally in China and in the U.S.?

Yes, Mike, good question. First of all, in the U.S., we are still the #1 player. And globally, it's always a bit more tricky to mention it. But of course, we are typically a high-end player. But if you look at overall, I think we're about the #6 or 7 of the world. That's basically where we are. And if you look -- concentrate on data center, it's about the #3 or 4 with some typical competition, but about the #3 or 4.

Okay. And then the follow-up is in Penang, I believe you're starting out with something like maybe 15 layer boards, but where are you moving to density in China for data center applications?

Yes. Yes, absolutely. You will not see us -- we still have, of course, capacity, let's say, below the 16 layers. But our focus is, let's say, beyond that, going to a lot of layers. One of our typical things happening right now is that we are demonstrating 87 layers. So this is going very, very rapidly.

And also on the stack micro VS to be more -- better, higher resolution, let's say, we're making really, really good progress. So working with customers on different aspects of the road map, be it more on the material side, be it more like asymmetrical designs like in PCBs, where you put the power on one side and the signal on the other side or, let's say, be it at the pitch where you try to minimize the pitch. We want to be a leader there.

And I can tell you, let's say, from my personal perspective here, we will invest a lot more in R&D and get more progress there to continue to be that top player.

[Operator Instructions] Our next question comes from the line of William Stein with Truist Securities.

Congrats on the great results tonight. Edwin, for investors who have not met you or had much experience with you, maybe you can share with us a little bit about your background, what led you to TTM. I understand you have some connections to the Board of Directors, but sort of what led you to the company? And maybe talk a little bit about how your experience and background leads you to succeed at TTM.

Okay. Happy to do that, Will, and good to meet you, by the way, and thank you for your nice words here. Yes, my background is, I'm an engineer. And of course, I did business school as well. 15 years, Philips, 20 years, DALSA and Teledyne, 9 years, let's say, leading the largest segment in Teledyne, the fastest-growing segment in Teledyne. And the last 2 years, I was the CEO of Teledyne, working closely with the executive chairman. And by the way, the new CEO as well, still really good relations with Teledyne and Teledyne will do great. But for me, it was time to do something else after 20 years. And TTM was a really good fit.

My background is physics and electronics and mostly semiconductor physics. So with TTM being a player in the back end, let's say, where the back-end players in silicon, the packagers, the PCB players, everybody comes together in that back end is absolutely a key thing to focus on. I still have great respect for the guys who are making the most complex chips. But nowadays, it's all about the back end. How can you integrate these chips, let's say, in a very compact heterogeneous package. And that's very exciting. And that's my main motivation to be part of TTM, a fantastic company, excellent leadership.

And again, a good relation with the Board of Directors. I know a few Board of Directors members, let's say, from my previous work. But again, this is a great company to be part of. Hopefully, that answers your question.

That helps. And one more, if I can follow up. The -- I don't know that these metrics are still entirely relevant because you're growing much faster now because of AI data center and also because defense is doing very well and margins are -- have been moving up. But at the last Analyst Day, the company had a 4% to 6% top line organic growth view and 11% to 13% operating margin target. Those were sort of the targets that the prior management team established.

I can't imagine you're going to give us new targets on this call, but I wonder if you can help us think about at least which metrics are most important to you? What are you trying to maximize like from a, let's say, from an outsider's perspective, just looking at the financials, what metrics and what levels should we think so that we're aligned with your way of thinking for the future of the company?

Yes. Great question. Thank you. First of all, we want to grow. The strategic plan, let's say, and even looking at already at next year, it's all about growth and of course, growth in a very qualitative manner. So we want to make sure that our gross margin stays very, very healthy. That's basically the #1 metric where you say -- where you can see if you're competitive. So that's the key thing here.

Of course, we like to generate cash. You saw our great cash position this quarter. Year-to-date, we're at a really nice level. This gives us a possibility not only, let's say, to do acquisitions, and we can do that both in a horizontal way or vertical way, let's say, buying more PCB factories or buying, let's say, up the chain. But also we can invest in our facilities, and that's what we do. We are planning to invest hundreds of millions, let's say, in our facilities in Penang and Syracuse and of course, also investing in China again. So that's going well.

The top metric for me is always cash. It's always growth, it's gross margin. And of course, our EBITDA should be healthy. Bottom line should be healthy. But again, we are set up to grow. That's my answer here.

I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Roks for any closing remarks.

Thank you, Sherry. And I'd like to close by summarizing the points I made earlier. First, we delivered strong sales growth in Q3 of 22% year-on-year, driven by increases in our data center computing, networking, medical, industrial and instrumentation and aerospace and defense markets with record highs in A&D and data center markets.

Second, our adjusted EBITDA of 16.1% reflected strong operating performance, leading to a record quarterly non-GAAP EPS of $0.67. And third, we had solid cash flow from operations of 18.8% of sales, enabling us to invest in our projected continued growth.

In closing, I would like to thank all employees of TTM, our customers, our suppliers and our shareholders for your continued support. Thank you very much. Goodbye.

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