Post-Pinch Point Business Leverage and Free Cash Flow Outlook
Management emphasized that the company has successfully navigated the 'pinch point' related to leverage ratio and amortization payments, with payments completed ahead of schedule, enabling increased financial flexibility.
The company anticipates a significant reduction in leverage ratio to below 2.2x by the end of 2025, which will enhance free cash flow generation.
Potential capital allocation options include share buybacks, debt repayment, and increased investment in sales and marketing, with a focus on deleveraging and strategic growth.
Operational Margin Improvements and Future Targets
Full-year operating margin increased to 14.2%, up 270 basis points, driven by higher revenue and favorable product mix.
NSE operating margin was 4.7%, with a goal to reach mid- to high-teens and eventually 20% as the business recovers and grows.
Management discussed historical NSE margins approaching 20% pre-telecom meltdown, with a long-term target to improve margins through growth in data center and military markets.
Adjusted EBITDA was $109.7 million or 15% of net sales, up from $84.6 million or 14% in Q2 2024.
Cash flow from operations was $97.8 million or 13.4% of net sales, with net leverage at a healthy 1.2x.
GAAP operating income was $61.8 million, up from $39 million in Q2 2024, and GAAP net income was $41.5 million or $0.40 per diluted share compared to $26.4 million or $0.25 per diluted share a year ago.
Gross margin increased to 20.9% from 20% in the prior year quarter due to higher sales volume and improved operational execution.
Non-GAAP EPS was a quarterly record at $0.58, adjusted for unrealized foreign exchange gains.
Non-GAAP operating margin improved 210 basis points year-over-year to 11.1%, marking the fourth consecutive quarter of double-digit operating margin performance.
R&D expenses were $7 million or 1% of net sales, down from $8.2 million or 1.4% last year.
Selling and marketing expenses decreased as a percentage of sales to 2.8% from 3.1%, while general and administrative expenses increased in dollars but decreased as a percentage of sales to 6.1%.
TTM delivered a strong Q2 2025 with revenue of $730.6 million, a 21% year-over-year increase driven by aerospace and defense, data center computing, networking, and medical/industrial/instrumentation end markets.
Dafinchi