TTM Technologies, Inc. (TTMI) Q2 2016 Earnings Conference Call July 27, 2016 4:30 PM ET
Sameer Desai - Senior Director of Corporate Development and Investor Relations
Thomas T. Edman - President and CEO
Todd B. Schull - EVP and CFO
Nikhil Kumar - Stifel Financial Corp
Sean Hannan - Needham & Company
Mark Strouse - J.P. Morgan
Good day everyone and welcome to the TTM Technologies Incorporated Q2 Earnings Conference Call. And now your host for today's conference Mr. Sameer Desai, Senior Director of Investor Relations. Mr. Desai, please go ahead sir.
Thank you. Before we get started, I would like to remind everyone that today's call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements related to TTM’s future business outlook. Actual results could differ materially from these forward-looking statements due to one or more risks and uncertainties, including the factors explained in our most recent Annual Report on Form 10-K, and other filings with the Securities and Exchange Commission.
These forward-looking statements are based on management's expectations and assumptions as of the date of this presentation. TTM does not undertake any obligation to publicly update or revise any of these statements, whether as a result of new information, future events or other circumstances, except as required by law. Please refer to the full disclosures regarding the risks that may affect TTM, which may be found in the reports on Form 10-K, 10-Q, 8-K, the registration statement on Form S-4 and the Company's other SEC filings.
We will also discuss on this call, certain non-GAAP financial measures, such as adjusted EBITDA. Such measures should not be considered as a substitute for the measures prepared and presented in accordance with GAAP and we direct you to the reconciliation of non-GAAP to GAAP measures included in the Company's press release, which was filed with the SEC and is available on TTM's Web site at www.ttm.com.
I'd now like to turn the call over to Tom Edman, TTM's Chief Executive Officer. Please go ahead, Tom.
Thomas T. Edman
Thank you, Sameer. Good afternoon and thank you for joining us for our second quarter 2016 conference call. I'll begin with a few highlights and a review of our business. Todd Schull, our CFO, will follow with a discussion of our financial performance. We will then open the call to your questions.
TTM delivered strong results in the second quarter. Revenue came in at $601.8 million and was within the guidance. Non-GAAP EPS came in at $0.28 per diluted share and was above First Call consensus by $0.10 and well above the top end of our guidance.
Our diversified revenue mix continues to yield benefits as improvements in cellular and communications end markets offset modest quarterly declines in the automotive and computing end markets. In addition, the aerospace and defense end markets achieved record revenues for the quarter.
I am particularly pleased to highlight our strong operational execution, which drove better than expected non-GAAP EPS during the quarter. As evidence of our improved operating efficiency and synergy realization are $0.28 EPS in the quarter, was significantly better than the $0.15 EPS of the two combined companies in the second quarter of last year on 7% lower revenue.
Finally, we prepaid $30 million of principal on our term loan in line with our focus on deleveraging. This is in addition to the $6.5 million of principal we repaid in the first quarter.
Onto a strategic update, we continue to deliver on our strategic goals of improved business diversification, leveraging our advanced technology position, growth in the automotive market and operational excellence. I've already discussed the benefits of diversification as reflected in our performance in the second quarter.
In the automotive area, the main growth driver for our business is increased electronic content due to industry focus on safety and emissions. We expect average PCB content will grow from the current $55 per vehicle to $65 per vehicle by 2020 with luxury vehicles having more than $100 in PCB content.
Our growth strategy is predicated on two priorities. First, we are focused on the fastest-growing applications in this industry, such as ADAS, Advanced Driver Assistance Systems, infotainment, electric vehicles, and radar and LIDAR systems.
Second, we are leveraging TTM's advanced technology and RF capabilities and bringing them to bear with our existing automotive customer relationships. One exciting example of this is 77 gigahertz radar, which provides higher resolution over a larger area enabling faster response times from ADAS systems.
We’ve already begun production of 77 gigahertz boards in a TTM facility for one automotive customer, while two others are actively working with TTM on new program development efforts. In regards to TTM's advanced technology solutions, we are now shipping rigid flex boards to eight automotive customers. And in the HDI area, we are shipping boards to 10 automotive customers and are actively qualifying for new customers.
From an overall operations standpoint, Q2 was an excellent quarter. All of our business units exceeded their forecast by remaining focused on yield improvement, the sharing of best practices, and efficiency improvements.
The combination of our business diversification initiative along with our solid operational performance allows us to execute on key -- on our key focus items of generating EBITDA, cash flow from operations, and paying down our term loan. In the second quarter, our adjusted EBITDA was $90.2 million or 15% of revenue.
Now I'd like to review our end markets. Until we establish new baselines for our end markets, we will provide the percentage of total revenue for the current quarter and the percentage of total pro forma sales for comparable periods. The pro forma results assume that TTM acquired Viasystems on December 30, 2014.
Networking communications remained our largest end market, as sales accounted for 25% of revenue during the quarter. This compares to sales of 24% in Q1 and 25% in the second quarter of 2015. Growth was fairly well represented in our mix of telecom and networking customers. However, we expect sales in this end market to decline and represent 22% of total sales in Q3 due to slowing demand, particularly, in the telecommunications area.
In our second largest market, automotive, sales represented 19% of total sales during the second quarter compared to sales of 21% in the first quarter and 18% in the year-ago period. The sequential decline in revenues stemmed mainly from our electromechanical solutions business unit, while PCB revenues increased slightly on a sequential basis.
Overall, this end market is still growing year-over-year as we continue to generate interest for our advanced technology products and operate our factories at high utilization rates. As such, the automotive market is expected to increase in dollar terms and contribute 20% of total sales in the third quarter.
The medical industrial instrumentation end market contributed 16% of total sales in the second quarter compared to total sales of 16% in the first quarter, and 15% one year-ago. Demand for our instrumentation products was solid and lifted sales on a sequential basis, while the industrial market continued to be soft. We expect sales for this end market to represent approximately 14% of third quarter sales.
The aerospace and defense end market represented 16% of total first quarter sales compared to 15% of Q1 sales, and 13% of sales in the year-ago period. Growth accelerated to 12% year-over-year from 5% last quarter as this end market continues to exhibit strength behind a solid backlog, which currently stands at $194 million as compared to $161 million a year-ago.
We expect sales in Q3 from this segment to represent about 14% of our total sales due to program timing. Sales in the computing storage peripherals end market represented 13% of total sales in the second quarter compared to total sales of 13% in Q1, and 11% in the same period one year ago.
In the third quarter, we expect sales in computing to represent approximately 12% of sales. The cellular phone end market accounted for 10% of revenue in the second quarter compared to sales of 9% in Q1 and 16% in the same period one year ago.
We saw improved cellular phone demand from some of our top customers in the quarter and expect this strength to accelerate in the third quarter as new models launch. We expect sales as a percentage of revenue to grow to 15% of our total sales in the third quarter.
Next I'd like to talk about technology and capacity utilization trends. During the quarter, our advanced technology business which includes HDI, rigid-flex, and substrate, accounted for approximately 29% of our Company's revenue. This compares to approximately 28% in Q1 and 33% in the year-ago quarter. The year-over-year declines are largely related to the decline in revenues in the cellular phone end market.
We are continuing to pursue opportunities and increase design activities that will leverage our advanced technology capabilities in new markets. We are seeing these efforts yield results, most notably in the automotive and aerospace and defense end markets in terms of both customer qualifications and revenue diversification.
Capacity utilization in Asia Pacific was 74% in the second quarter unchanged from Q1. Our combined overall capacity utilization in North America was 59% in the second quarter compared to 57% in Q1. The increase was largely due to the increasingly robust demand climate in aerospace and defense.
Finally, I’d like to provide an update on our customers and order backlog. Our top five customers contributed 29% of total sales in the second quarter of 2016 unchanged from 29% in the first quarter. Our top five OEM customers during the quarter in alphabetical order were Apple, Bosch, Cisco, Erickson, and Huawei.
Our largest customer accounted for 10% of sales in the second quarter compared with 10% in the first quarter. At the end of the second quarter, our 90 day backlog which is subject to cancellations was $380.7 million compared to $374.5 million at the end of the first quarter. Book to bill for PCBs was 1.02 for three months ending June 27.
In summary, we delivered second quarter financial results which demonstrated the benefits of our diversified end market mix, as well as our operational execution. Our strong cash flow in the quarter allowed us to make another debt prepayment in line with our stated deleveraging strategy. We continue to be optimistic about the future of TTM.
Now Todd will review our financial performance for the second quarter.
Todd B. Schull
Thanks, Tom, and good afternoon, everyone. Before I jump into the details, let me summarize a few of the financial highlights for the quarter.
Revenue in the second quarter was $601.8 million, up $18.5 million sequentially. But a decline on a pro forma basis from last year's second quarter of $648 million due primarily to declines in the cellular phone end market.
Non-GAAP EPS was $0.28 in the second quarter. This was above the midpoint of guidance by $0.09 and above the combined EPS the two companies in the second quarter of last year of $0.15. The year-over-year improvement reflects the benefits of our diversification and synergy initiatives, as we were able to offset the negative impacts of lower revenue in our cellular phone end market at an increased share count,
We achieved the non-GAAP operating margin of 7.7% an improvement from the combined 5.9% operating margin of the two companies last year. Despite lower revenues and an improvement from 3.1% in the second quarter in 2014 when we experienced a similar cell phone cycle.
We generated $90.2 million of adjusted EBITDA. Cash flow from operations during the second quarter was $80.1 million, a strong rebound from the first quarter. We completed our synergy initiatives by delivering the $55 million in cost savings on schedule. We repaid $30 million of our debt in the second quarter demonstrating our commitment to deleveraging.
To date now, we’ve repaid over $105 million of the debt we incurred to acquire Viasystems. So on to the details. For the second quarter net sales of $601.8 million compared to net sales of $445.4 million in the second quarter of 2015 and compared to the first quarter net sales of $583.3 million.
The year-over-year increase in revenue was due to the -- due to sales from the Viasystems acquisition of approximately $182 million. Partially offset by the declines in the cellular phone end market. GAAP operating income for the second quarter was $34.7 million. Compared to an operating loss of $7.1 million in the second quarter of last year and compared to operating income in the first quarter of $18.9 million.
On a GAAP basis, our net income for the second quarter of 2016 was $18.5 million or $0.17 per diluted share. This compares to a net loss of $36.6 million or $0.41 per diluted share in the second quarter of last year and $7.3 million or $0.07 per share in the first quarter of this year.
The remainder of my comments will focus on our non-GAAP financial performance. A non-GAAP performance excludes restructuring, impairment, and gains on sales of fixed assets, acquisition related costs. Certain non-cash expense items and other unusual and frequent items as well as the associated tax impact of these items.
Additionally we exclude non-operational changes in our tax expense such as the impact of retroactive changes in the tax law and non-cash discrete items. We present non-GAAP financial information to enable you to see the company's in the eyes of management, and to provide better insight into the Company's ongoing financial performance.
Gross margin in the second quarter was $16.3 million compared to 15.5% in the second quarter of last year, and 14.4% in the first quarter. The year-over-year increase in gross margin was due to improved execution,. Its certain acquired plants and savings from our synergy initiatives, partially offset by reduced volumes that are cellular phone focused plants. A sequential increase was due primarily to broad based operational execution and higher volumes at our networking and communications end market focused manufacturing facilities.
Selling and marketing expense was $16.3 million in the second quarter or 2.7% of net sales compared to $12 million or 2.7% of net sales in the same quarter a year-ago. And $17.1 million or 2.9% of net sales in the first quarter. The year-over-year increase in the amount of sales and marketing expense was due to the inclusion of Viasystems.
Second quarter G&A expense was $35.2 million or 5.8% of net sales compared to $27.6 million or 6.2% of net sales in the same quarter a year-ago and $33.7 million or 5.8% of net sales in the previous quarter. The year-over-year increase in the amount of G&A expense was again due to the inclusion of Viasystems and the decrease in G&A as a percentage of revenue reflects the leverage gain from our acquisition.
Interest expense was $14.5 million in the second quarter, a decrease of $1.1 million from the first quarter. We recorded $3 million of foreign exchange gain and other income net in the second quarter compared to a net gain of $1.1 million in the first quarter.
Our operating margin in the second quarter was 7.7%. This compares to 6.6% in the same quarter last year and 5.7% in the first quarter of 2016. The significant improvement year-over-year demonstrates the benefits of diversifying our revenue base and our focus on operational execution and cost management.
Our effective tax rate was 21% year to date and 19% in the second quarter on a standalone basis. The year-over-year and sequential improvement is due to a more favorable geographic mix of our profit.
Second quarter net income was $28.4 million or $0.28 per diluted share. This compares to the second quarter 2015 net income of $14.9 million or $0.17 per diluted share. In the first quarter net income of $13.9 million or $0.14 per diluted share.
Adjusted EBITDA in the second quarter was $90.2 million or 15% of net sales compared with second quarter a year-ago adjusted EBITDA of $59.7 million or 13.4% of net sales. In the first quarter adjusted EBITDA was $74.5 million or 12.8% of net sales.
So moving onto to our segment performance. The PCB segment had net sales of $561.4 million in the second quarter, up from $417 million in the second quarter of 2015 and up from $526.8 million in the first quarter.
Gross margin for this segment was 17.1% in the second quarter compared to 16.1% in the same quarter last year and 15.6% in the first quarter. The year-over-year improvement in sales and gross margins were noted in my earlier comments.
The PCB segment second quarter operating income was $65.6 million compared to $38.7 million in the same quarter last year and $52 million in the first quarter. The electromechanical solution segment had net sales of $40.4 million in the second quarter, up from $28.4 million in Q2 last year and down from $56.5 million in the first quarter.
The year-over-year revenue increase was due to the contribution of sales from the Viasystems acquisition. The sequential decrease in revenue reflects lower volumes across several end markets and the closure of our Juarez facility. Gross margin for this segment was 8.5% in the second quarter compared to 5.8% in the same quarter a year-ago and 6.7% in the first quarter.
Electromechanical solution segment second quarter operating income was $0.7 million compared to $0.4 million in the same quarter last year and $1.1 million in the first quarter.
Corporate SG&A expense not directly associated with the PCB or the electromechanical solution segments was $17.9 million in the second quarter of 2016, $9.8 million in the same quarter last year and $17.8 million in the first quarter of this year. The year-over-year increase was due to the inclusion of Viasystems.
Cash flow from operations was $80.1 million in the second quarter, reflecting a nice bounce back from Q1. Year-to-date we’ve generated approximately $100 million on track with our full-year expectations.
Cash and cash equivalents at the end of the second quarter totaled $216.2 million, an increase of approximately $32 million from the first quarter of 2016. During the second quarter, we repaid $30 million of our term loan bringing our year-to-date repayments to $106.5 million.
Although we may not make the repayments every quarter, our goal is to be aggressive in paying down our debt. The combination of debt repayment, strong operating profits, and a full-year of EBITDA post-acquisition has reduced our leverage ratio to 2.5 from 2.9 last quarter, keeping us well on track towards achieving our goal of 2.0 within 2 to 4 years post-acquisition.
Depreciation for the second quarter was $40.5 million. Now I'd like to turn the guidance for the third quarter. We expect total revenue for the third quarter of 2016 to be in the range of $620 million to $660 million. As a reference point, our first quarter revenue last year was $652 million.
On a year-over-year basis, declines in the cellular phone, computing, and networking communication end markets are being partially offset by growth in the aerospace and defense in automotive end markets. We expect non-GAAP earnings to be in the range of $0.29 to $0.35 per diluted share. EPS forecast is based on a diluted share count of approximately 102 million shares and this compares to EPS of $0.24 per diluted share in the third quarter of 2015,
We expect that SG&A expense will be about 7.8% of revenue in the third quarter. We expect interest expense to total about $14.1 million and we estimate our effective tax rate to be between 19% and 23%. To assist you in developing your financial models we offer the following additional information. We expect to record during the third quarter amortization of intangibles of about $5.9 million. Stock based compensation expense of about $2.9 million, Non-cash interest expense of approximately $4.7 million and we estimate depreciation expense will be approximately $37 million,
Finally, I'd like to mention that we will be participating in the Needham Industrial Conference, in New York City on August 4th the Drexel telecom media technology conference in New York City, September 8th -- 7th and 8th, and the Deutsche Bank leverage finance conference in Scottsdale, September 26 through to 28th.
That concludes our prepared remarks. And now I'd like to turn the -- like to open the line for questions. Rufus?
Thank you, sir. [Operator Instructions] And for our first question we go to Nikhil Kumar with Stifel.
Yes, hi. Thanks for taking my question. This is Nick for Matt. Can you, I mean your guidance implied a nice sequential jump from your cellular business, I mean, could you talk about where the strength is coming from and how much is that coming from your -- one of your top customer, and how much is coming from other customers.
Thomas T. Edman
Yes. So, let me just talk about first of all overall cellular. I think what we’re seeing is a regular pattern for TTM whereby we have completed at this point prototyping stage and we’re now into the ramp on new product. And that will -- we expect that to continue through third quarter and fourth quarter. So certainly that's the normal situation as our customers introduce product towards the latter half of the year. And as you know our China and Korea customers also do a product introduction in the first half of the year. But what’s unusual in the second half of the year is that you really see a concentration of really everyone introducing a new product and that yields to or that brings us to an aggressive ramp starting in third quarter.
And do you expect that is trying to continue in Q4. I mean, could you provide, share any visibility on Q4?
Thomas T. Edman
What I would say is, I just point you to historical activity. And historically what will happen is, we’ll be working very focused on new product ramp and on improving our yield in the third quarter. That carries into the fourth quarter where we -- coming out of the third quarter we’re looking to have stabilized yield, be building into that fourth quarter. Generally our customers will evaluate the situation what they see in terms of ongoing demand having filled their own pipelines or look at ongoing demand usually around December. So it certainly carries into that fourth quarter period.
And that's helpful. And lastly on, guidance also implied like operating margin it should be around 9%. I mean, going forward do you think it's more of a function of volume or do you have more opportunities to move around your cost?
Todd B. Schull
Well, Nikhil, we’ve been working very diligently since the acquisition on making sure that we realize the synergies that we envisioned when we made the deal. I think we’ve been very successful in accomplishing that. We’ve been very consistent, and I think we’ve done a good job of communicating that. You’re seeing the benefits of that flow through. Certainly there was probably one more incremental piece that we’ll see in the third quarter and that's reflected in our guidance that we’re offering, where we’re now hitting kind of the full run rate benefit in our P&L from the synergies, and that's certainly a big reason for the sequential improvement. And then the other reason on the sequential improvement is we’ve got some increased revenue volume sequentially. A fair amount of that is coming in our electromechanical solutions division which has little different margin profile of course as you know versus our PCB segment. It's about 25%, 75% split in terms of the revenue growth between those segments. And that will affect the profitability, but that factors if you’re looking at volume and the incremental kind of the last incremental step in our synergies it's really driving our improvement. To answer your question, is this sustainable? I think we’ve demonstrated pretty soundly here that it is real and it's not a flash in the pan. I mean, we live in a competitive world, nothing ever stays static and ongoing challenges and marketplace dynamics certainly will play a role in what happened. But we’ve structured or restructured the cost profile of our underlying business now to operate at a pretty high performance level. We’re very focused on operational execution. We’ve got the management infrastructure to support that. We’ve got the focus from our management team and our employees in large that are really working hard on that, and that adds bearing fruits in our business model also. And I think all of that contributes to really building a new platform, kind of this is the company that we envision. We’ve talked a long time, since [indiscernible] for being long weighted, but you’re touching on a couple of points here. In terms of our target model of 10% you highlighted the fact that our guidance implies an operating margin of close to 9% in the third quarter, which is an accurate observation by the way, and it reflects the sustained improvement and the realistic expectations we have of getting to that 10% target. We need a little more revenue to do that and $650 per quarter. But the heavy lifting, the biggest pieces of that where we’re starting to see, we’ve hit operating margin performance levels in Q1 and Q2 now that are much, much higher than we historically have seen in Q1 and Q2 if you go back to look at past years performance. That's the reset, that's the strategy that Tom has been articulating for several years now, and I think we’re starting to be able to see that manifest in our financial results.
That's helpful. Thank you.
Todd B. Schull
For our next question, we go to Sean Hannan with Needham & Company.
Yes. Thanks for taking my question. Nice work folks on the cost out, the execution, just a nice trend.
Thomas T. Edman
Thank you, Sean.
The question I have here is just getting back into the cellular market, a little bit more high level. Can you talk a little bit about where you stand today in terms of your customer diversification. I think that there are some ongoing efforts. I think some of that was alluded to a moment ago, just trying to get a sense of how to think about that over the course of the next 12 months. It seriously has been a, I think a concern among investors as we saw your stock really trading probably more so as derivatives this spring as a concern of you being customer in that space, probably much more sort of in warranty, so just an update would be helpful. Thanks.
Thomas T. Edman
Sure, thanks Sean. Yes, so let me talk first, I think and really what Todd just covered on, very effectively I believe is on the cost side of our operating model. In terms of the revenue side, what the acquisition has brought us as a company is tremendous diversity in terms of market exposure. That was a deliberate part of our strategy, and we now have a very well balanced portfolio in terms of what we’re looking at in end-markets and also the breadth of our technology portfolio. So if you look at the end-markets, we’re looking at cell phone being at 10% in the second quarter, sure it's moving up in the third quarter, but we’re looking at about 15% in the third quarter. That's a relatively small portion when you think about the balance of the business being 85%, a lot much of that being in industrial areas and particularly in automotive and networking communications. So, as we’ve built deliberatively we’ve now got a revenue mix that we like, it's in the right growth market. All of these markets that we’re involved in are growing long-term and have very solid projections and underlying factors behind that growth. And then as a company what we’re using the cellular phone side to do is to help drive our advanced technologies. And those of you who are involved in semiconductor industry will appreciate this. What we are seeing is lines and spacing shrinking. The cellular phone industry, smartphone business tends to drive miniaturization. That leads to new technology development. We’re on the forefront of that development with our cellular phone business and we’re taking those same advanced technologies now, taking them into automotive. I talked about the momentum we have with some of our critical high HDI accounts which again those are accounts that are working on miniaturizing their electronics and therefore have a need for this technology particularly in the infotainment and camera applications. And we’re also seeing advanced technologies now move into aerospace and defense. As that area of focus is on miniaturization, we’re seeing it in networking telecom as well. So that end-market and the work we do there really allows us to build a base that we can then move into our other end-markets, and we’re very deliberately building a strategy around increased market share, increased technology share in those business areas as they move into these advanced applications.
Yes. That's very helpful. And then, as you drill down another level deeper, within that, the context of that cellular group, is there -- there is further diversification going on there from a longer term perspective as well. Correct?
Thomas T. Edman
Yes, correct Sean. And yes, I mean within -- so within the cellular phone space and of course smartphone area is a dynamic area. But about 25% of our business today is, would be in greater China/Korea. And we have again been very intent on building our presence with those customers. As I mentioned earlier those customers tend to have two product introductions through the course of the year. That allows us to better handle our utilization rates in the front half of the year, helps us to move the utilization rates up in our advanced technology facilities during that period of time, and again that coupled with a longer term strategy to move the advanced technologies into new markets.
That's great. It's great balancing. All right, thanks very much.
Thomas T. Edman
[Operator Instructions] And for our next question we go to Paul Coster with J.P. Morgan.
Hi, this is Mark Strouse on for Paul. Thanks for taking our questions. So I just wanted to talk about auto real quick. So we’ve seen some of the auto OEMs report slowing growth. You guys are pointing to pretty strong 3Q, but just wanted to see beyond 3Q how we should think about kind of the cyclical aspects in the auto industry. And really how we should weight that versus your comments earlier about the increasing content per vehicle and the ASP is increasing over time?
Todd B. Schull
Yes, and I think that you just hit on the key point. Of course it's very -- it's a very positive situation when unit volumes grow. We like to see unit volume grow, but the more important factor for TTM is that electronics content growth. And that electronics content growth which then translates for us into opportunities in radar, opportunities in infotainment, opportunities in electric vehicles as that area develops and then general systems opportunities. But really it's that move in terms of electronics content that drives towards miniaturization, the addition of safety systems, automated driving and electrification. These are all trends that drive demand for printed circuit boards and particularly for advanced printed circuit boards. So that's what we follow. And just as an indicator, I think the forecasters are generally looking at 5% to 7% overall growth rate for automotive PCB. We’re intent on growing at a rate higher than that because of our strength on the advanced technology side. We certainly saw that growth last year at about 10%, overall we’re looking at doing that same kind of growth this year and long-term it's our intent and our strategy to continue that trend of growing above where the industry is being forecast.
Perfect. Thank you very much.
Todd B. Schull
[Operator Instructions] And with that ladies and gentlemen, we have no further questions on our roster. Therefore Mr. Edman, I will turn the conference back over to you for any closing remarks.
Thomas T. Edman
Thank you. I’d just like to close by summarizing a few of the real critical points. First, we delivered strong results for the second quarter. We beat the high end of our non-GAAP EPS forecast as well as consensus. That was based on our broad based operational execution. Second, our diversification initiative continues to reap benefit as we -- as a rebound in our communications and cellular phone end-markets offset some of the weakness that we saw in automotive and computing in the quarter that diversification strategy is critical for TTM going forward. And third, we’ve continued to pay down debt that is shown by a $30 million payment in June. That will be, we will continue our focus on cash generation going forward. I’d like to thank you; I’d like to thank our employees and our customers as well for all of your continued support. Good bye.
And ladies and gentlemen, this will conclude today's conference. Thank you for your participation. You may now disconnect.
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