TTM Technologies Inc

NASDAQ:TTMI

Earnings Call Transcript 2019-Q4

[Operator]

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the TTM Technologies Fourth Quarter 2019 Financial Results Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will open for questions. [Operator Instructions] As a reminder, this conference is being recorded today, February 5th, 2020.

Sameer Desai, TTM's Senior Director of Corporate Development and Investor Relations will now review TTM's disclosure statement.

[Sameer Desai, Senior Director, Corporate Development & IR]

Thank you, Brad. 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 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 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 [ph] substitute for the measures prepared and presented in accordance with GAAP and we direct you to the reconciliation of non-GAAP to GAAP measures included in the Company's press release, which was filed with the SEC and is available on TTM's website at www.ttm.com.

I will now turn the call over to Tom Edman, TTM's Chief Executive Officer. Please go ahead. Tom.

[Tom Edman, CEO]

Thank you, Sameer. Good afternoon and thank you for joining us for our fourth quarter 2019 conference call. I'll begin with a review of our business strategy including highlights from the quarter followed by a discussion of our fourth quarter results. Todd Schull, our CFO, will follow with an overview of our Q4 2019 financial performance and our Q1 2020 guidance. We will then open the call to your questions.

I am pleased to report that in the fourth quarter of 2019 TTM generated revenues and EPS above the guided range. Strong year-over-year growth in aerospace and defense, cellular and computing offset year-over-year declines in other commercial markets. In addition, we recovered from the operational challenges in Q3 with solid execution in Q4, in both our aerospace and defense and commercial business driving strong margin improvement sequentially despite flattish revenues. Finally, financial discipline drove cash flow from operations to a strong $130.1 million in the quarter. For the year, cash flow from operations was $311.9 million compared to $273.1 million in 2018 despite declines in revenue and profit year-over-year.

Two weeks ago we announced that we will be divesting our mobility business unit to AKMMeadville, a Chinese consortium for $660 million in cash. This was a strategic decision which allows us to focus on longer-cycle markets and reduces our exposure to short product cycle and seasonal consumer markets, which historically have been prone to volatility. In addition, cellular market growth has slowed, but still requires substantial capital investment, making it challenging to meet our desired business model.

We were pleased to find a buyer that had product synergies as well as capital resources to invest in the cellular market to support our customers and the 7,500 employees associated with this business unit. The transaction is expected to close towards the end of Q2 with proceeds to be received towards the end of Q3. We plan to use the proceeds to reduce debt and invest in the Company and will provide more details closer to close. This transaction aligns with our strategic focus on diversification, differentiation and discipline and we expect that in the long term, it will pay off for TTM, our investors and our customers. We are also carefully monitoring the coronavirus situation in China as we put the health of our employees first in our priorities.

Our facilities have delayed their post-Chinese New Year start-up by an average of nine days with plans to restart operations on February 10th in line with government requirements. We have implemented a regimen in our facilities to protect our employees from the spread of the disease through procedures such as regular facility sterilization, mandatory masks in our facilities, temperature checks for all incoming employees and visitors, mandatory quarantine for employees returning from the impacted provinces and other measures. We also have established a task force at the corporate level to coordinate communications with our customers regarding any impacts to production. We have done our best to incorporate the potential impacts of the extended shutdowns and ongoing production impacts in our guidance for the first quarter.

In the meantime we will remain focused on operational excellence and financial discipline as well as our strategic goals of diversification and differentiation. In particular, we will continue on our path towards differentiation in the aerospace and defense and automotive end markets. We continue to see strength in the aerospace and defense market. Two significant areas of focus are missiles and munitions and radar systems which are expected to lead our growth.

With the continued adoption of AESA radar technology across all armed services and the conversion of next-generation gallium nitride or silicon germanium based platforms, the AESA radar market is expected to grow at an average -- at an 18% CAGAR. AESA stands for active electronically scanned array and represents the next generation technology for defense radars.

TTM is the leader in the design and manufacturing of RF subsystems and components for AESA radar systems and is well positioned to benefit as defense programs upgrade from traditional mechanical radars to fixed solid state AESA radar. This technology allows our customers greater performance in range, accuracy and sensitivity, which in turn increases detection and defense capability.

Defense spending remains robust which will provide a strong tailwind over the next few years, while near term strength is being driven by our strong program alignment with strategic defense programs which number more than 80. Our A&D market book-to-bill ratio at the end of the fourth quarter was 1.13% driving our A&D program backlog to a new record level of $600 million, a significant milestone for our aerospace and defense business and exceeding the $572 million in Q3 of 2019 and $481 million in Q4 of 2018.

Our aerospace and defense revenues grew 15% year-over-year in Q4, achieving a new record level. We capitalized on positive market trends through our team's dual focus on supporting both customer build the print and design specification requirements across a broad base of major defense and commercial aerospace programs. In addition, we announced the opening of a new engineering center in Binghamton, New York and an advanced technology manufacturing facility in Chippewa Falls, Wisconsin.

Following the acquisition of manufacturing and intellectual property assets from i3 Electronics, we hired a number of engineering experts, previously employed by i3, to strengthen our technology capabilities and extend our patent portfolio for emerging applications for the aerospace and defense and high-end commercial markets.

Moving on to our automotive business, we continue to develop positions and new programs related to the megatrends of vehicle safety and autonomous driving, hybrid and electric vehicles, advanced infotainment and increased connectivity requirements. Our goal will be to support our existing customers as they adapt to this new world while also building business with a set of new innovative technology-focused customers. Because of the above macro trends there continues to be a tremendous amount of innovation in the automotive electronics industry.

In 2019 advanced technology revenue, which includes radar, lidar and HDI, was 23% of revenue compared to 19% of our revenue in 2018. Our design activity remains robust, which bodes well for future revenues. In the automotive market, customer engagement begins well before a product ramps. In the quarter we won 58 new automotive designs with a lifetime program value of $77 million, of which $17 million were ADAS related. For the year, we captured a total of 248 design wins, compared to 190 in 2018. Designs that we are winning this year will contribute to revenues in future years.

Now, I'd like to review our end markets. Note that my comments will reflect the inclusion of the mobility business unit. We plan to give pro forma end market expectations as we near the close of the transaction. For TTM the aerospace and defense end market represented 26% of total fourth quarter sales compared to 23% of Q4 2018 sales and 24% of sales in Q3 of 2019. We expect sales in Q1 from this end market to represent about 31% of our total sales.

For the full year aerospace and defense increased 15% and reached a record high as TTM benefited from increased defense spending and demand for multiple new programs. In 2020, we expect growth to continue to outpace market projections of 2% to 4%.

The cellular phone end market accounted for 16% of revenue in the fourth quarter compared to 14% in Q4 of 2018 and 19% in Q3 of 2019. We expect cellular to represent 10% of revenues in Q1 due to normal seasonal declines. For full year 2019, cellular declined 13% as cellular customers managed inventory and reduced demand in a slowing smartphone market. Due to better inventory management by our customers in 2019 as well as growth prospects from 5G, we expect this market to grow in 2020 above longer-term forecast of 2% to 5%.

Networking/communications accounted for 15% of revenue during the fourth quarter of 2019. This compares to 18% in the fourth quarter of 2018 and 13% of revenue in the third quarter of 2019. Many of our networking and telecom customers declined year-over-year due to softness in service provider spending as well as impacts from the trade war between the United States and China as we stopped shipments of US made wireless components to Huawei. In Q1 we expect this segment to be 13% of revenue as these trends continue. For the full year networking/communications declined 13%. Due to the anticipated soft start in the first half, we expect this market to be below longer-term forecasts of 3% to 5% growth in 2020.

Automotive sales represented 14% of total sales during the fourth quarter of 2019, compared to 16% in the year-ago quarter and 17% during the third quarter of 2019. Automotive sales declined year-over-year due to weakness from diesel products in Europe and sales levels in China. The sequential decline was a result of our EMS business as the automotive PCB business was actually flat sequentially. We expect automotive to contribute 13% of total sales in Q1 with PCB sales expected to be down sequentially as a result of a delayed start-up post Chinese New Year. For the full year automotive declined 16% as softer unit volumes in China and Europe more than offset gains in PCB content. In 2020 due to the anticipated soft start, we expect the market to be below longer-term forecast of 5% to 8%, mostly as a result of significant declines in our EMS segment.

Sales in the computing, storage, peripherals end market represented 14% of total sales in the fourth quarter compared to 13% in Q4 of 2018 and 12% in the third quarter of 2019. We saw strength in our semiconductor and data center customers, partially offset by declines in high-end notebook sales. The laptop and tablet revenues were approximately 30% of computing revenues in Q4 and will be included in the pending Mobility business unit divestiture. We expect revenues in this end market to represent approximately 15% of first quarter sales. For the full year, computing declined 10% as we saw declines across our data center server customers.

In 2020, we expect to be above the expected end market growth of 1% to 3% due primarily to a recovery in our semiconductor and data center customers. The medical, industrial, instrumentation end market contributed 13% of our total sales in the fourth quarter compared to 14% in the year-ago quarter and 13% in the third quarter of 2019. We saw strength in our instrumentation customers that was offset by weakness in our industrial customers due to declines in global industrial demand. For the first quarter, we expect this market to be 16% of revenues.

For the full year MI&I declined 6% due to weakness from our industrial customers from reduced manufacturing activities and impacts from trade wars. In 2020, we expect growth to be in line with the 3% to 5% forecast with year-on-year momentum driven by our large instrumentation customers and business development activities with new customers.

Next, I'll cover some details from the fourth quarter. During the quarter, our advanced technology business, which includes HDI, rigid flex, substrate and RF subsystems and components accounted for approximately 42% of our Company's revenue. This compares to approximately 38% in the year-ago quarter and 41% in Q3. The sequential and year-over-year increases were due to a combined growth in our cellular and computing end markets.

We are continuing to pursue new business opportunities and increase customer design engagement activities that will leverage our advanced technology capabilities in new markets. Capacity utilization in Asia-Pacific was 72% in Q4 compared to 73% in the year-ago quarter and 71% in Q3. Our overall capacity utilization in North America was 57% in Q4 compared to 57% in both the year-ago quarter and Q3. Our top five customers contributed 37% of total sales in the fourth quarter of 2019, compared to 35% in the year-ago quarter and 38% in the third quarter of 2019.

Our largest customer accounted for 18% of sales in the fourth quarter versus 17% in the year-ago quarter and 20% in Q3. At the end of Q4, our 90-day backlog, which is subject to cancellations, was $511.2 million compared to $463.4 million at the end of the fourth quarter last year and $529.3 million at the end of Q3. Our PCB book-to-bill ratio was 1.05% for the three months ending December 30th.

I'd like to conclude by emphasizing TTM's commitment to operational discipline and strategic focus. While we had a challenging year in terms of revenue declines in our commercial end markets we managed our business well by adjusting our cost structure, maximizing our cash flow and executing a strong fourth quarter. In addition, we made progress on our strategic goals of diversification, differentiation and discipline through the acquisition of the assets of i3, initial revenue synergies from the Anaren acquisition and the divestiture of the mobility business unit. While we are facing short-term challenges from the coronavirus, longer term we expect to benefit from secular trends such as 5G wireless technology, increasing automotive electronics content and increasing use of RF electronics in the aerospace and defense industry.

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

[Todd Schull, CFO]

Thanks, Tom and good afternoon everyone. As you can hear, I've got a bit of a cold. So if you hear my voice fading in and out, please bear with me. For the fourth quarter net sales were $719.3 million compared to net sales of $711 million in the fourth quarter of 2018 and compared to third quarter 2019 net sales of $716.8 million. The year-over-year increase in revenue was due to growth in our aerospace and defense, cellular and computing end markets, partially offset by declines in our networking and communications, automotive, and medical, industrial and instrumentation end markets.

GAAP operating income for the fourth quarter of 2019 was $49.4 million compared to $42.8 million in the fourth quarter of 2018 and $36.4 million in the third quarter of 2019. On a GAAP basis, net income in the fourth quarter of 2019 was $25.3 million or $0.21 per diluted share. This compares to net income of $52.5 million of $0.42 per diluted share in the fourth quarter of last year and $15.9 million or $0.14 per diluted share in the third quarter of 2019. The fourth quarter of 2018 results reflect the release of a tax valuation allowance of $43.6 million.

The remainder of my comments will focus on our non-GAAP financial performance. Our non-GAAP performance excludes acquisition-related costs, restructuring costs, certain non-cash expense items 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 provide better insight into the Company's ongoing financial performance.

Gross margin in the fourth quarter was 17.6% compared to 17.5% in the fourth quarter of 2018 and 14.8% in the third quarter of 2019. The year-over-year improvement in gross margins was due primarily to the changes in revenue noted earlier.

Selling and marketing expense was $18.3 million in the fourth quarter or 2.5% of net sales versus $18 million or 2.5% of net sales a year ago and $17.8 million or 2.5% of net sales in the third quarter. Fourth quarter G&A expense was $36.2 million or 5% of net sales compared to $33.1 million or 4.7% of net sales in the same quarter a year ago and $34.2 million or 4.8% of net sales in the previous quarter.

Our operating margin in Q4 was 10.1%. This compares to 10.3% in the same quarter last year and 7.5% in the third quarter of 2019. Interest expense was $16.6 million in the fourth quarter, a decrease of $1.5 million from the same quarter last year due to lower interest rates and debt repayments. During the quarter we recorded $4.3 million of foreign exchange losses. Government incentives reduced the loss to $3.1 million or approximately $0.03 of EPS. This compares to a gain of $2.3 million or approximately $0.02 of EPS in Q4 last year and $7.9 million or approximately $0.07 in the third quarter of 2019.

Our effective tax rate was 16.6% in the fourth quarter. Fourth quarter net income was $43.9 million or $0.41 per diluted share. This compares to the fourth quarter 2018 net income of $55 million or $0.52 per diluted share and third quarter 2019 net income of $38.9 million or $0.37 per diluted share.

Adjusted EBITDA for the fourth quarter was $111.3 million or 15.5% of net sales compared with fourth quarter 2018 adjusted EBITDA of $117.4 million or 16.5% of net sales. In the third quarter adjusted EBITDA was $103.5 million or 14.4% of net sales.

Cash flow from operations was $130.1 million in the fourth quarter versus $151.8 million in the same quarter last year. For all of 2019, cash flow from operations was $311.9 million versus $273.1 million in 2018. Cash and cash equivalents increased at the end of the fourth quarter to $400.2 million from $316.7 million in the third quarter as we accumulate cash for the repayment of our convertible bond that matures in December of 2020. Effective at the end of Q4, our convertible bond is now classified as short-term debt on our balance sheet. Depreciation for the fourth quarter was $42 million. Net capital spending for the quarter was $47.3 million.

Now, I'd like to turn to guidance for the first quarter. As Tom mentioned earlier, the coronavirus outbreak is affecting our operations in the PRC. As part of the government's approach to control the virus, the Chinese New Year holiday has been extended to February 10th, about nine days longer than expected. Given the reduced number of production days, we expect total revenue for the first quarter of 2020 to be in the range of $580 million to $620 million. We expect non-GAAP earnings to be in the range of $0.05 to $0.11 per diluted share, which reflects $0.09 of negative EPS impact from the additional nine days of shutdown.

If the coronavirus outbreak causes the government to extend the factory shutdown beyond February 10th, our financial results will be negatively impacted even further. The EPS forecast is based on a diluted share count of approximately 108.5 million shares. Our share count guidance includes dilutive securities such as options and RSUs and 1.3 million shares associated with our convertible bonds which is a function of our future stock price.

As a reminder for every dollar increase in the average stock price above $14.26 during the quarter, our shares outstanding would increase by approximately 1.5 million shares. We expect that SG&A expense will be about 8.9% of revenue in the first quarter. We expect interest expense to total about $17.2 million. Finally, we estimate our expected tax rate to be between 13% and 17%.

To assist you in developing your financial models, we offer the following additional information. We expect to record during the first quarter amortization of intangibles of about $11.6 million, stock-based compensation expense of about $3.8 million, non-cash interest expense of about $3.6 million and we estimate depreciation expense will be approximately $42 million. We plan to provide pro forma financials excluding the mobility business as we near the close of the transaction.

So this concludes our prepared remarks and now I'd like to open the line for questions. Brad?

[Operator]

Thank you. [Operator Instructions] And we'll take our first question from Matt Sheerin with Stifel.

[Matt Sheerin, Stifel Nicolaus]

Yes, thank you and good afternoon. Just first question regarding the extended shutdown in your China facilities regarding the coronavirus. How should we think about another extension, let's say, another week or so? Is it sort of in that $0.09 for every 10-day type of or more or less from that? And then -- and if indeed the workers come back at the scheduled time, would you expect any distractions maybe less people coming back which could hinder production ramps as you get back to work?

[Tom Edman, CEO]

Matt, those are really good questions. So let me answer the second one first. In terms of, I'd say a trickling effect of employees coming back, we know there's going to be some quarantine requirements. We have tried to comprehend to that in our guidance that was provided. So that's part of that $0.09 of bad news that we're attributing to the coronavirus. To your second point, what if it gets extended. It won't be the same magnitude because we've kind of -- it just moves the trickling effect a little farther down the road, if you will. So it won't be quite the same magnitude. Roughly half of that, I would suggest is probably the impact if we continue to decline a week at a time. That's the best we can see at this point. It's obviously a very fluid situation and we're getting updates almost daily, not only from the government in terms of what's going on, but also from our own internal folks as we communicate with our workers.

[Matt Sheerin, Stifel Nicolaus]

Yes. And I guess the other issue is that other parts of the supply chain are also under constraint and if they don't come back have places to ship and I'm sure you're talking to customers. I guess the last follow-up to that is whether or not you would see these orders just get pushed out and you would make some of that up in Q2.

[Tom Edman, CEO]

So, yes. Thank you, Matt. A few things going on there, a few aspects to that question. Yes, absolutely, we're remaining close to our vendors as well most of whom have China-based facilities and we're coordinating with them to try to mitigate impacts, but obviously that is a major factor here. And in terms of the customers and coordination with the customers, you're right. As we come out of this, we're going to be making sure that we do our best to meet customer requirements and prioritize and we're working with them to prioritize their production needs. And there is also a piece of this that we can manufacture in our facilities in North America or in Hong Kong. So we're also trying to certainly support QTA requirements out of those facilities.

So yes, I mean it is -- this is, as you know, it's a logistics exercise right now to try to plan for coming out of new year -- Chinese New Year and do our best to then meet customer needs. If -- yes, you're not going to see -- these aren't orders that are going away. These are orders that we're going to do our best to service either as we come out of Chinese New Year out of our existing facilities and at the end of the day it may result in delays in certain aspects of production.

[Matt Sheerin, Stifel Nicolaus]

Understood. Okay, that's it for me. Thank you.

[Tom Edman, CEO]

Thank you.

[Operator]

We'll take our next question from Steven Fox with Cross Research.

[Steve Fox, Cross Research]

Thanks. Good afternoon. Sorry, another question on the impact of the coronavirus. What you're talking about from a financial impact doesn't contemplate any impact if your customers may be down for longer or have different types of supply chain issues. This is just the direct impact that you see on your plan at this point, right?

[Tom Edman, CEO]

That's correct.

[Steve Fox, Cross Research]

Okay. And then when you think about sort of the supply chain, have you got any indications or are you seeing any kind of activity that would maybe even suggest customers would be anxious to pull in orders as much as they can, given that maybe the supply chain to be disrupted for a longer period of time?

[Tom Edman, CEO]

Yes. So best way to respond to that, Steve, right now the -- so number one, I have to be -- our customers are really working with us and understanding of the situation. As you know, they're dealing with an industry and printed circuit boards where 70% approximately of board production is in China. So they recognize the challenges there. And so there are -- there is movement in terms of how they prioritize products. And that -- and so sure that can be pull-ins in certain places and also can be push-outs in products that they're de-prioritizing. So right now it sort of goes both ways in terms of our dialog. And of course, all of this is planning at this point because we won't be back in production. If all goes according to plan at this point, we won't be back into production until early next week. So that's the kind of coordination that's occurring right now.

[Steve Fox, Cross Research]

Got it, appreciate the color. And then switching gears to your end markets, you mentioned that you're seeing -- you mentioned a better demand or recovery in semi-cap and data center demand. Can you sort of talk about what that means, like what kind of slope of recovery are you factoring in? And then I have one other follow-up. Thank you.

[Tom Edman, CEO]

Yes. No -- thank you. I think if you look at semiconductors -- so semiconductor capital equipment requirements, which really fall into our MII area, we've seen a pretty steep acceleration in terms of requirements there. And as you know, that's a business that it moves up very rapidly. I think you're going to see some sustained requirement, strong requirement there for the next several quarters. Hard to sort of look beyond that into the -- towards the end of the year, but a very -- I think a positive -- certainly a positive upward trend that we've seen starting early Q4 and really moving through what we're seeing in Q1.

On the data center side, we saw ramps restart again in our Q4 and certainly look to be strong, again, at least through the first half of this year and then we'll see how visibility develops beyond that. But -- yes, we've been pleased to see that that period of digestion on the data center side at this point seems that our customers have moved through that. They are now ramping on new programs. Those ramps typically will be two quarter to three quarter kind of ramps and they're staggered a bit depending on the customers. So, good to see that kind of momentum right now in the data center side.

[Steve Fox, Cross Research]

Got it, that's interesting. And then just very last point, you've had some excellent growth in aerospace and defense in the last couple of years. You highlighted why it can't continue. But can you just sort of add around the edges why that growth maybe doesn't slow down after the last couple of years. Like what would be the one or two more salient points to the fact that [indiscernible] going on?

[Tom Edman, CEO]

Yes, sure. Yes, so I think there are two real factors as far as TTM is concerned. One as we are seeing requirements and broad technology requirements in aerospace and defense and they are sort of reflective of what you see on the commercial side of the business around 5G, but increased requirements in terms of the lines and spacing for boards, in terms of RF related requirements. And those requirements being pretty broad in terms of programs requiring advanced technology. So that gives us a strong feeling of confidence in this market. And then, over and above that we have really radar growth that's going to drive the -- AESA radar installations and that will -- that wave of demand should continue for a good long time because of the fixed radar installations that are out there that need to be upgraded or replaced. So you're looking at a multi-year requirement there for radar and radar technology shifts.

So our determination in this market is to continue to engage and move forward in terms in that engagement. Certainly an RF is the first priority but more broadly as we bring in our advanced technology capabilities out of the new Chippewa Falls facility to be able to supplement what we're doing in RF with what we're doing more broadly in printed circuit board technology to improve our upfront engagement with those customers. So I think we've got the right strategy in place and certainly the market momentum continues to be there for TTM.

[Steve Fox, Cross Research]

Got it, that's helpful. Thank you very much.

[Tom Edman, CEO]

Thanks, Steve.

[Operator]

Thank you. Our next question comes from Mike Crawford with B. Riley FBR.

[Mike Crawford, B. Riley FBR]

Thanks. Continuing on the aerospace and defense theme, well, we did like Raytheon's 1.5% book-to-bill in the fourth quarter, but are there any particular new programs you're looking to get funded when we see the new fiscal '21 DoD budget request later this month?

[Tom Edman, CEO]

So, if you -- I'll just answer it broadly. I think any program that involves extensive radar replacement those are programs that we're keenly interested in. We will certainly highlight major program wins. Last quarter we highlighted LTAMDS, which really is the Patriot missile upgrade. And that program win -- that was a really good one in terms of TTM content. And so, if you're looking at -- as we look at programs, we look at spending plans, we are encouraged by a couple of things. I think -- I talked about the radar. We are also encouraged by the attention to space and space requirements and that's going to again push the boundaries of technology. And when you're looking at pushing lines and spacing, pushing reliability requirements, those are opportunities for us. And so as you -- that's the other sort of category of programs that I would keep my eyes on. And definitely encouraging to see a real emphasis out there on the technologies that are required going forward. So very positive climate for us on the aerospace and defense side.

[Mike Crawford, B. Riley FBR]

Okay, great. Can we add hypersonics to that as well as some space?

[Tom Edman, CEO]

You can, absolutely. Hypersonics fit right into -- right into that category. And as you can imagine hypersonics, you are going to be looking at lines and spacing, again sub 100 micron towards heading into the 50 micron type lines and spacing, if not below, in order to accommodate some of the chipsets that are being developed. So, yes, that's a real positive.

[Mike Crawford, B. Riley FBR]

Okay, great. And then just one other question on the automotive vertical, you obviously are growing the advanced technology piece, which is I think 23% in the latest quarter. When do you think it is the...

[Tom Edman, CEO]

That's right.

[Mike Crawford, B. Riley FBR]

Tipping [ph] point where that becomes over 50%?

[Tom Edman, CEO]

So -- actually it's 23% in the last year.

[Mike Crawford, B. Riley FBR]

Okay.

[Tom Edman, CEO]

So that was the full-year number and that was up from 19%. We try to update that every year. The previous year it was about 13%. So we went from 13% to 19% to 23%. I don't think we're -- frankly, I don't think we're going to get to 50%. I think it's entirely possible we could move up towards somewhere between 30% and 40%. The reason for that is that EVs are still going to demand substantial -- there are going to be substantial requirements for heavy copper standard -- heavy copper conventional printed circuit boards. Those are still very difficult to build, because of the voltages that you're running through those boards. So these are very complex conventional boards, but they are in the conventional category.

And then, of course, you're going to have the additional requirements for sensors, the additional requirements for infotainment, but you're still going to have that base need for conventional boards. And I don't see that changing as we go forward. So conventional board should continue as we again as SAR [ph] starts to come back, we should start to see growth come back on the conventional side. And then what you'll see is a higher growth component to the advanced technologies.

[Mike Crawford, B. Riley FBR]

Okay, great. Thank you.

[Tom Edman, CEO]

Thank you.

[Operator]

Thank you. [Operator Instructions] We'll take our next question from Mike Cikos with Needham & Company.

[Mike Cikos, Needham & Company]

This is Mike Cikos from Needham. Just on the auto end market, I'm interested, can you kind of walk us through -- I understand the challenges that that market is seeing on the demand front, but you guys continue to win programs there, especially on the ADAS side. How is the health of that market currently, just from a new program perspective, putting aside demand. I'm just interested in how ebb and flow of that market is.

[Tom Edman, CEO]

And, Mike, specifically to the automotive market, correct?

[Mike Cikos, Needham & Company]

Correct. Yes.

[Tom Edman, CEO]

Yes. So I would say that -- and as we highlighted and as you can see in the trends, we're still -- the number -- the wins that we're gaining in terms of the new technology area and particularly in the ADAS space, are continuing to maintain strong momentum. So we're still seeing very good innovation there and I would expect that to continue. We're still seeing a lot of activity, frankly on -- out of China, as well as what we see out of the US. So even with the industry struggling, I think there is a strong acceptance that these are -- the innovation is critical to the future and that that is an area of emphasis and continued commitment from customers. So, I don't see a major change in the pace in terms of our design wins and also the innovation that's occurring on our customers' side. And I think the -- we tried to show that with the data. If you would think about 58 automotive design wins that is up from the previous year, I expect that trend will continue as we go forward.

[Mike Cikos, Needham & Company]

That's helpful. And then if you could also just delve a little deeper into your compute and storage peripheral end market as well as the medical, industrial end markets. I'm just interested in I guess how Q4 played out versus your expectations.

[Tom Edman, CEO]

As we look out through the course of 2020 specifically or Q4, how did we do against expectations in Q4?

[Mike Cikos, Needham & Company]

I was looking more at Q4.

[Tom Edman, CEO]

Okay, sure. So if you look at computing, we actually really did well in computing based against our forecast in Q4 we saw that data center strong growth where we actually saw semiconductor activity pick up as well and both areas and particularly I'd highlight so while data center was a good -- nice steady build. And what we saw in the semiconductor side was a much more rapid and urgent requirement as we sort of progressed through the quarter. So really strong developments there and over what we had forecast. So that was great.

On the MII side, actually, we ended up pretty much on where we had forecasted for MII. I would highlight just the inside of that. We saw more weakness than we expected in industrial and that was then what we saw on the instrumentation side there was more strength than we expected. So I highlighted earlier the semiconductor capital equipment requirements, very strong and stronger than had been forecast as we came into the quarter. And then that was balanced by industrial being weaker than we had expected in the quarter. So that's where the movement was. Medical continued to chug along pretty well.

[Mike Cikos, Needham & Company]

Okay. And just building on that, back to the computing, I know that you said the data center demand was relatively steady whereas the semi was more rapid, more urgent. Is that...

[Tom Edman, CEO]

Yes.

[Mike Cikos, Needham & Company]

Just a reflection of those different end markets on how they typically move or was this new as far as that more rapid and more urgent demand coming out of semis?

[Tom Edman, CEO]

No, I would put that, yes, that's not untypical and with the data center demand it's -- and so we had forecast growth there. We saw stronger growth in data center than we had expected. And so what I meant by steady is the steady ramp that we saw through the quarter on data center. Yes, on the semiconductor side, not unusual. Most of our Board requirements go into test and burn in requirements in semiconductor and so they are tied to innovation. And if our customers have a drive, if there is a program drive for a new platform or a new capability that's when we see these spikes. And so that can be subject to pull-ins, that can be subject to demand that's higher than we forecast. So not unusual to see changes there that are a little bit outside of our forecast.

[Mike Cikos, Needham & Company]

Okay, great. Thank you.

[Tom Edman, CEO]

Thank you.

[Operator]

Thank you. And we have no further questions at this time. I would now like to turn the conference back to Mr. Tom Edman for closing remarks.

[Tom Edman, CEO]

Sure thing. I'll just close by summarizing some of the points we made earlier. First, we delivered earnings above the guided range, we generated strong cash flow, we recovered from operational challenges last quarter. Second, we announced the divestiture of the mobility business unit, which will reduce the volatility we have always historically seen in our business performance. And it's also fits well with our core strategies of diversification, differentiation and discipline.

And finally, I'd like to thank our employees, customers and investors for their and your continued support as we navigate the challenges to our businesses. And I particularly want all of us to think about and certainly we do a lot of thinking about the well-being of our employees as they deal with a challenge with the coronavirus in Hong Kong and in China. And I know you share the same feelings and certainly our thoughts are with those employees. And we all are looking for the impact here to be short-term in nature as we continue at TTM to focus on our – on the longer-term strategic focus areas of diversification, differentiation and discipline. Thank you for joining the call. Goodbye.

[Operator]

Ladies and gentlemen, this concludes today's call. We thank you for your participation. You may now disconnect.